holdyourthoughts

Do something you love everyday

2012-01-23T17:10:00.000+05:30

I keep a list of things that I like doing. At the beginning of every week, I make sure I put atleast one thing from that list into my calendar. Some of the things I have on that list are:
reading detective novels (preferably Agatha Christie!!),

watching a detective or thriller movie,
playing tennis,
watching tennis!!,
speaking to close friends (the good old adda),
having a cup of self-made darjeeling tea,
reading investment books and reports,
playing with my son, reading him stories
listening to songs from Kishore Kumar

the list goes on...

It is important to do things that you love frequently. It refreshes and recharges you.

Do the Impossible

2012-01-13T11:46:00.003+05:30

I came across this incredible presentation on doing the impossible. Each of the quotes is soul-inspiring.

Do The IMPOSSIBLE

Office Productivity Booster: 3 Tips I use

2011-12-28T20:19:00.002+05:30

Here are three tips that i have personally benefited a lot from at work.

Read through your emails 2-3 times a day

Stop checking your emails every few minutes. I use Lotus Notes for work emails and had replication set to 1 minute. Now, I have moved away from those crazy days and check mail between 2-3 times a day. Once at the beginning of the day and once more around around 3 pm in the afternoon. What this has done is left me a lot of time to do "actual work". I am now no more a slave to my emails.

Stop multitasking

This is really critical. Multitasking is crazy. There are tons of research on the ill-effects of multitasking on attention, concentration and ability of recall information. So, to really do quality work, just focus on do one thing at a time. If you are really keen, you can use the Pomodoro technique. I use it fairly regularly and think it brings in a good deal of focus as it forces you to work against the clock.

Put your important tasks on your calendar

Previously most of the time, my calendar just had my meetings in them. Then I realized that the meetings were, with a few exceptions, a near complete waste of time. Time for the real work that I was doing was never planned for. So, I started blocking my time on my calendar for all the important work that I had to do that day or week. So now, my calendar is more a true reflection of what I need to do at a particular time (and yes, I include both work and personal tasks in my Lotus Notes calendar and sync it with my mobile phone).

There are lot of other learning that I have had over the years to be more productive and use my time more effectively, which I will keep sharing from time to time.

Let me know if you have any good productivity booster that you have particularly benefited from yourself.

PM Talks Tough!!!

2011-12-23T11:35:00.002+05:30

In a discussion with the leaders from Indian industry, Indian Prime Minister let his displeasure known. "It is a little disappointing to hear negative comments from our business leadership or be told that govt's policies are causing slowdown and pessimism. Such comments have added to uncertaintyand have emboldened those who have no stake in our economic growth."

It is like a school child who has failed in a class but is petulant and saying that why are you all saying that I have failed, it makes me look stupid in front of others!! The problem, Dr Singh, is that whether you like it or not, the govt and by extension you, have been performing miserably. No amount of talking tough or big is going to change that. Instead of raising your voice to these people, better do it with your coalition partners and your party members and get some real work done!

Bharat Ratna: Is the change in guidelines good?

2011-12-22T12:30:00.002+05:30

Lately there has been a large hue and cry over the changing of the criteria for awarding the Bharat Ratna to "performance of highest order in any field of human endeavour". This is a modification from the previous criteria of restricting winners from the fields of art, literature, science and public services.

The detractors are saying that the rules have been changed to facilitate awarding Sachin Tendulkar. And since Sachin is a sportsperson, which is by nature "a form of entertainment" and does not contribute to nation-building, should be excluded. I have nothing to say for or against Sachin as an individual awardee. My only contention is that I am not very sure of how people like Bhimsen Joshi, Bismillah Khan, Lata Mangeshkar, Pt. Ravi Shankar, M. S. Subbulakshmi - all musicians have contributed to the "nation-building"!! Similarly, the award has been presented to all Prime Ministers that headed Congress governments. I am not sure how great a job was actually done by people like Gulzarilal Nanda, and MGR, Lal Bahadur Shahstri and VV Giri.

I have nothing against these people individually. It is just that I do not understand that this holier-than-thou attitude of some professionals!

Blogs: New focus

2011-12-17T11:34:00.000+05:30

I am planning to make some clear demarcations between my two blogs. ValueInvstr would continue to focus on investing. I would focus on equity value investing, economic viewpoints, behavioral finance, financial news and views, financial book reviews and the very popular guru speak.

This blog will continue with an emphasis on my other interests - management, leadership, politics (again with emphasis on Indian and Bengal politics).

Please feel free to comment on my posts (or send me emails as before).

Dream: How to control India's fiscal deficit?

2011-12-14T16:45:00.001+05:30

Warren Buffet had two wonderful ideas that he has espoused over the years for fixing the fiscal deficit for US. Here let me outline two solutions that will go a long in solving this in India. But these ideas can also be extended to make governance work in India.

Solution 1:
Make a rule which automatically disqualifies all the sitting parliamentarians for running in the subsequent general elections once a threshold fiscal deficit target is breached!!

Solution 2:
Issue export certificates to all exporters for the dollar equivalent of their exports. Imports will be allowed only against a valid "export certificate". Create a secondary market for trading these certificates like stocks or bonds. For example, say Infosys exports software services for $1 billion. They get certificates for that amount. Now, Indian Oil needs to import oil. They can buy those certificates from Infosys in the open market and use it for the import of oil upto $1 billion. What will happen in reality is that because there is a disparity between import and export, the prices of the certificates will be higher that face value. So, for $1 bn of import, Indian Oil may need to pay say $1.1 bn. Over time, exporters will increase as it will be very remunerative for them and balance out the trade deficit. This is similar in concept to trading carbon-credits.

I just love the first idea. The problem is who will create such a rule!! Definitely not the parliamentarians themselves. So, it will always remain a quirky idea, at best.

Leadership crisis all around

2011-11-02T21:28:00.000+05:30

Everywhere around I look, I see a crisis of leadership. In Bengal, India, in the world, everywhere. There are simply on one who can be a role model for the future generations.

In Bengal, the state is plagued by myriad problems. Primary among them is an acute shortage of cash to pay salaries and pensions to the state government employees. Yet, there is a leadership vacuum to bite the silver bullet and raise taxes and reduce government expenditure. The government and its ministers are busy promising developmental programs for which there is no money! The only way to garner tax resources in the long term is to encourage business prosperity. It is going to be difficult to do this as the government has a stated policy of non-interference into land acquisition. You cannot have big factories without large tracts of contiguous land which the government is unwilling to deliver. So, no one wants to be unpopular in the short term to do things which are important for the long term.

In India, we have been living in suspended animation for the last year and a half. There is a caretaker government and petrified ministers in place headed by a "visiting" PM. I cannot think of a worse PM that India has had to suffer. Dr. Singh may be a good academician but is an awful leader. I hope history judges him kindly, but he runs the risk of going down as the worst performing PM in Indian history.

The opposition is equally dysfunctional. Instead of taking up important issues in and out of Parliament, they keep bickering over who gets to lead the rag-tag coalition. One is now on a India tour in a AC mini-van and for some unknown reason calls it a "rath". Another one is sitting in a one-day fast in a AC hall to spread harmony! There has been a recent emergence of an extra-constitutional group of holier-than-thou people who are hell bent on removing corruption. Although, the goal is surely laudable, I am not sure who will "police-the-police". India needs to take a lot of tough decisions. Everyone knows most of those. Like taxing agricultural income, removing subsidies, building infrastructure. But there is no leader, no government who is willig to do it because they are scared of the short-term impact of taking unpopular decisions. Instead what we get is rate hikes and petrol price rise (and people owning Mercedes Benz worth fifty lakhs run their cars on subsidized diesel)!!

The same story gets repeated in the US. The politicians can't agree to reduce costs and increase taxes. If a family earns 100 dollars and keeps spending 150 dollars, there is only two things that can be done. Either increase the family income or reduce the expenditure. But here again no one wants to take the unpopular decisions involved. Classic case in point is now being played out in Greece. The PM has called for a referendum on the Euro bailout package. He wants to spread the blame to his colleaggues and countrymen of agreeing to a life of misery!

I hope that out of this crisis emerges one (or many) strong leaders who take their respective people to their destiny. But, as of now, I don't see anyone on the horizon.

US Trip for the NextGen Workshop

2011-08-14T18:55:00.000+05:30

I was to travel to US on Friday night (early Saturday morning, Aug 13, 2011) for New York. From Friday morning, I was not feeling well. Had a slight fever, headache and a queasy feeling. Overall, a bad day to start travel on a 21 hour flight away from home.
I got to the airport and it was raining really heavily. Then as lady luck would have it I got upgraded to Business Class! My first trip on business class. So, the flight experience was good. After a while, the effect of the medicines that I had taken took effect and I started feeling a better. Slept nearly all the way to Frankfurt.

At Frankfurt, I had to go from one end of Terminal 1 to the other end. A good 1-1.5 km walk in the morning. Then for the New York flight was announced and it was a A380. Had heard so much about it when it was launched. From the outside it looks imposing, nearly 1.5 larger than the regular size. But the inside, atleast for this particular flight, was the same old one. Here again, I got a good seat, although no upgrade to Business Class this time :-( I got a seat near the emergency exit, so miles of legroom. And no one on the seat next to me.

My mama was there to pick me up at the airport. We then went to Jackson Heights, Queens, for an Indian lunch. I was not hungry at all, so had very little to eat, though the Tandoori chicken was very nice. Mama, as usual, had enough for between 2 to 3 normal people. I don't know what would have happened if he had not been such a regular and prolific tennis player. With his kind of appetite, he would burst at the seams, had he not got the regular rigorous exercise. Or maybe it's the other way round!! Maybe he eats so much because he plays a lot. Who knows!!

We then went off and bought some Hilsa and then went and met one of Mama's friends - Kerry. Kerry has half-billion dollar business empire and lives accordingly. Haven't seen a palatial house with a swimming pool, tennis court, indoor auditorium and an outhouse anytime before in my life. Keryy seemed a really nice and down-to-earth person. He was playing tennis when we got there. We chatted a bit and then we had to leave. My friend, Bishu, was waiting to pick me up from a nearby shopping mall.

I cam with Bishu to his place. It is so good to see your friends and family when you are away from home. Bishu and I had lived together for 4 years during our college. Hostel mates, room mates and it was no nice to see him here now. He hadn't changed a bit from when I last saw him a year or so back.

Then we drove to his place. His son is about 2 years now and is so cute. Keeps reminding me of Neil. Radhika, Bishu's wife, had cooked a great deal for dinner, but I guess was very disappointed when she saw the quantity I eat.

Then I went off to sleep bringing to end an eventful day. More tomorrow.

Goals Execution - The Agile Way

2011-07-27T17:45:00.001+05:30

I just completed listening to a brilliant audio book today from the Franklin Covey foundation on "Execution". Here is what I learnt.

Execution is the most important aspect of strategy. Nothing works if you can't execute it. It is dependent on a few factors:-

Goals - Have focused goals. Max of 3. More goals dilute the focus.
Find out the measurable factors for your goals - the lag (the dependent variable y) and lead indicators (the independent variables x1,x2 etc)
Create a dashboard to monitor if you are winning the execution game. It should contain both lag and lead indicators.
Monitor the dashboard results daily/weekly ONLY for the identified goals.

Book Review: Let's Do Lunch by Roger Wilson

2011-06-07T10:59:00.000+05:30

I read this book sometime back as part of my journey of understanding food and how it affects the body and mind. In the last two years I have managed to lose about 10kgs of weight and in the process have learnt a fair deal about food, although not enough to talk authoritatively with a nutritionist.

Roger Wilson's book deals mainly about how the author lost a significant amount of weight himself after trying his own diet plan. The diet he followed was eating fruits and proteins. His lack of fundamental knowledge of nutrition makes his commentary a suspect from the very beginning. This book is more a chronicle of the authors weight loss journey than a guide to healthy eating.

Conclusion: Better to avoid.

Jairam Ramesh rekindles the IIT-IIM debate

2011-05-28T09:48:00.001+05:30

Jairam Ramesh, the environment minister and an ex-IIT graduate has rekindled the debate of the effectiveness of the quality of research and faculty at the IITs and IIMs in India. As expected, people have taken a position based on their allegiances. IIT/IIM alumni and faculty have come out vociferously to defend their alma mater. People are amazed that an ex-student whose father was also the head of Civil Engineering department at one of the IITs can break rank and speak out against them! Various reasons are being put forward for the lack of quality research, primary among them is the lack or delay of funds from the government.

Interestingly, what is getting sidetracked in all this noise is that fact that Jairam Ramesh is actually right. It is a fact that the quality of students going into these institutes is far better than what other esteemed colleges abroad (MIT, Caltech, HBS etc). I would really like to see one experiment that would prove the mettle of the faculty. Let them swap one batch of students with a medium/low grade engineering/business school and let's see what happens. If the faculty is so sure of their capability they should be able to make great engineers / managers out of them. I can guarantee that they will fail miserably.

I can give a personal example. I have visited most of the engineering colleges a in eastern and western India for campus recruitment for my company over the last decade. We went to one of the IITs (I will not say which one) and interviewed a host of students. For B.Tech students, there was a huge (really really huge) difference in quality between the students who were in the general category and the ones who got in through some quota. Additionally, we interviewed M.Tech students who had come in from non-IIT background and found them to be way behind the curve in every aspect. We practically had to come back empty-handed.

The point I am making is that the faculty is the same, same classroom, same facilities, yet there is this huge difference in the quality of output of students. Just goes to prove that just the faculty is not enough to drive excellence. Excellence comes from a combination of factors, primary among them is the student. If there is garbage-in, you get garbage-out. If there is excellence-in, you get excellence-out. It's as simple as that.

Bengal Votes For Change

2011-05-16T14:28:00.000+05:30

The future of Bengal took a turn (for better or worse – the debate continues) when the votes were counted on May 13^th, 2011. Trinamool Congress, Mamata Banerji’s thirteen year old party along with its one time parent party, the Congress, swept the Bengal assembly polls. The combine won 227 of the 294 seats and with it ended the 34 year rule of the Left Front – the longest by an elected communist government anywhere in the world.

There are two prevalent reactions that I have seen after the elections. Some are saying that Bengal has jumped from the frying pan to the fire. Others are saying that let us give these guys a chance. If they don’t perform, we can always vote them out. I am more inclined towards the second line of thought. My argument is that today Bengal is at the bottom of a “bear-market” (if I may borrow a term from the stock markets). It can’t really get much worse.

The fact is that for a lot of people in our generation have never seen a non-Left government in the state and may be thinking that a "known devil is better than an unknown one", specially when the option available is Mamata Benerjee. Mamata has never been very popular with the "thinking" people mainly because she has been a maverick and is famous for her inconsistent behaviour. There are a lot of people, including me, who do not like her brand of politics. But what is interesting for me, is that she has been able to attract people like Amit Mitra and Manish Gupta to her fold.

As it stands, nearly every parameter of development, whether it is education, healthcare, finances, industry, is in shambles. My main concern is with the state of the industry, where we are arguably doing the worst. In 2010, Bengal had investments of Rs 15 thousand crores. The Vibrant Gujarat summit for 2011 got investment proposals for 12 lakh crores. That is nearly 100 times what we did in 2010.

I was reading a paper published by Amartya Lahiri and Kei-Mu Yi in 2004. Read it if you find the time and are enthusiastic to delve deeper into this subject. The paper compares the economic evolution of the states of Maharashtra and Bengal between 1960 and 1995. In 1960, these were the two richest states in India. Bengal during the study period has gone from a relative per capita income of about 105 percent of Maharashtra to a relative income of around 69 percent.

In terms of per capita GDP, Bengal is again down in the dumps with USD 876 (see http://en.wikipedia.org/wiki/List_of_Indian_states_by_GDP). Sikkim, Mizoram and Meghalaya are doing better in terms of per capita GDP. The highest is Goa with USD 2802, followed by Delhi – USD 2400, Haryana – USD 1663 and Maharashtra – USD 1563.

So, my question is what can be worse than where we are currently? There is not much downside to a new government. There are so many challenges that this new government has that it would be interesting and instructive to observe how it goes about its tasks. I, for one, will be watching very closely.

Infosys 3.0 - An outsider's perspective

2011-05-04T09:14:00.002+05:30

First a disclosure: I work in an IT company and this post reflects my personal opinion and not that of my company.

Infosys made the long-awaited and eagerly anticipated event in Indian corporate calendar (nearly as eagerly awaited as the succession-planning event currently on at Tata Sons). The stake here was very high. Infosys is a highly regarded Indian IT giant. It, alongwith a few others, created the IT outsourcing phenomenon that has become part of the standard business model today. The question was can Infosys move to the next generation of leadership. It had been guided all along by NR Narayan Murthy (NRN) and later by the more charismatic Nandan Nilekani. With NRN’s retirement from the Chairman’s position, the top position was open for the first time.

Infosys announced that K.V. Kamath would step in as Chairman and S.D. Shibulal would be the new CEO and S. Gopalakrishnan (the current CEO, better known as Kris) would be the Executive Co-Chairman.

To me, this announcement has effectively taken the company back a few years. Bringing in K.V.Kamath itself is a retrograde step. I am not overly impressed by Kamath’s stint at ICICI. He took a conservative lending organization and took unnecessary and imprudent risks. His successor has had to curb a lot of aggressive lending practices to bring the bank back on track. ICICI is still not out of the woods but is definitely much better off than when Kamath was around. ICICI was one of the worst hit banks during the post-Lehman crisis. All this does not make Kamath a great leader and/or visionary.

Next comes the choice of Shibulal as CEO. That is even worse. Anyone who has watched Infy’s quarterly reports with the media would probably agree that Shibulal is someone who you would not allow with a mid-level manager’s job in a mid-sized company. He does not display any ability to articulate his thoughts clearly, seems forever confused when asked tough questions, does not seem to understand numbers or long-term strategy well. In short, he comes across as someone who is utterly confused and out-of-his-depths in the boardroom of a large company. To make him CEO just because he was “lucky” to be a programmer in NRN’s team and provided a portion of the risk capital when they founded the company defies any logic.

I have nothing to say for Kris’ position as Co-Chairman. A Co-Chairman is a showcase position anyway and Kris does not display any dynamism to bring any new thoughts or actions to the position, so there is no point is wasting more space on his appointment.

What is disturbing is what it does to the morale of the next level of managers at Infosys. Mohandas Pai and Dinesh have already resigned. Although they claim that they were not aspirants to the CEO position, anyone who believes that has to be naïve. Others, may follow suit. If not, you have a complacent set of second level managers, who are mostly all multi-millionaires (if not billionaires) thanks to the great stock-option plans at the company. All this does not bode well for the company.

It would be interesting to see what happens in the future. I, alongwith many others, would be watching keenly.

Bengal Elections - The Winner's Curse

2011-03-22T14:57:00.000+05:30

Elections are coming up in the state of West Bengal (not sure why we keep calling West Bengal, when there is no East Bengal in India, just Bengal would have made more sense), and as per popular media, it seems Mamata Banerjee's Trinamool Congress (TMC) and Congress combine is likely to win.

Before I start, let me clarify my political inclinations. I typically favour any political formation that can create and sustain economic growth and provide good governance. I do not vote for any party. In that sense, I am what is known as a “floating voter”. I tend to see politics through the eyes of economics and eventually the stock markets.

In Bengal, there are two things that are close to the people's heart – sports and politics. After nearly 34 years, the Left Front comprising of the CPIM, CPI, RSP and Forward Bloc are on the verge of losing the possession of the famed Writers Building – the seat of political power in Bengal. In their place, a coalition of TMC and Congress alongwith some smaller, lesser-known parties like SUCI and PDS have joined forces are touted to win this year's elections.

The tragedy of Bengal is that there is no economically sound-minded political party. Both these formations, the Left Front and the TMC/Congress are unabashedly leftist in economic policy. The reason is very simple to understand. The majority of voters in Bengal are rural poor and pandering to that section is more critical from a vote bank perspective. So, the middle-class are left out completely from public policy making. This has necessitated a culture of pampering and pandering to the poor even in urban areas. For example, hawkers in Kolkata cannot be removed and has now been legalized as everyone wants their votes. Auto-rickshaws cannot be taken to task as “livelihood of poor people” depend on it even if they spew black smoke and cause lung cancer. The greater good is never important if the interests of a minority number of “poor people” are hurt.

Mind you, I am not anti-poor. I just think that the actual poor would be better off, if the state could provide them with better access to healthcare facilities, education, food security and opportunity for getting jobs. No interest is shown in these aspects of public policy (that is generally true for India as a whole).

Right now, all developmental work is stopped because to do anything you would need land and land primarily belongs to those who are tagged as rural poor or are in the possession of land-grabbers who cannot be vacated. Mamata Banerjee's sudden change of fortunes after the complete washout in the 2004 Lok Sabha and 2006 Bidhan Sabha elections came on the back of her relentless agitation against the Tata Nano factory at Singur and the Chemical Hub at Nandigram. The ruling party completely mismanaged both these initiatives and the end result was that both had to be scrapped.

A party which has come into the limelight by blocking industrialization will find it very difficult to push through any industrial development program. The would risk alienating those very people on whose support they have come to power. Creating a land bank in a state like Bengal is also difficult as the only arid land that is available is either in the hills or in districts like Purulia and Bankura where there is a huge problem with the Maoist movement now. Also, the physical infrastructure in these districts leaves a lot to be desired for industrial development.

Another aspect which would be intriguing to watch is how the new government tackles the cultural issue of bandh/gherao/hartal. Bengal has been the worst offender in this area and it has permeated in the fabric of the culture. Unless, this issue is resolved or atleast tamed, new investment would be hard to come by.

There are many more issues which plague Bengal today including huge budget deficits, complete lack of public infrastructure, politicization of democratic institutions and rampant corruption.

Whoever wins this election, these issues need to be addressed for the development of the state. It looks, for the time-being, very much like a possible case of the winner's curse.

Sleeping With The Enemy - Nokia and Microsoft

2011-02-13T11:22:00.001+05:30

Nokia's recent announcement of chucking out their Symbian platform and bringing home the Windows Phone 7 is an interesting move by both Nokia and Microsoft. This is marriage of two partners who were once the greats and now are fighting younger, nimbler opponents on their own turf. Apple with its iPhone and later Google's Android platform has made life very difficult for Nokia. Similarly, Microsoft is battling its monopoly on operating systems and office suites on multiple fronts like the Google Chrome OS platform, Google Docs, Facebook, Open Doc movement.

What is interesting for me is Nokia's perspective here. They were still the market leaders overall in mobiles. By moving away from their own platform, they have own relegated themselves from a A league to the B league. There is no difference now between a Chinese or Taiwanese mobile assembler and Nokia. They have moved from a high margin business to a commodity oriented low margin business. What prompted them to do this is what would be interesting to understand.

Microsoft, on the other hand, has been a gainer in the transaction. They suddenly get a reputed brand endorsing their platform and enhance their market share manifold. Mobiles, tablets, handhelds are the likely consumer devices of the future. Microsoft, from being an outsider in that segment, all of a sudden would be catapulted to one of the top-three positions. So, its all great news for them. It just needs to be seen how they capitalize on the opportunity.

What happens to Nokia is anyone's guess. The next 2-3 year would make or mar the company's prospects. They remind of so much of great technology companies of the past – Kodak, Xerox, Palm, Motorola, Texas Instruments and a lot others – who were all big names during their hay day but now are also-rans in an ever-changing and unforgiving industry.

Resolutions for 2011 and a review of last year's resolutions

2011-01-04T12:29:00.000+05:30

I had made five resolutions last year. It's time to review how I have done with respect to those and take a fresh guard for 2011.

Year	Resolution	Result	Remarks
2010	Lose 5 kgs (or more) of weight	I have gained a little bit of weight at the fag end of the year, so now I am back to 78 kgs!	· Continued in 2011. Needs a better detailed plan. · 2010 did not work out well. · Plan to reduce atleast 0.5 kgs per month.
2010	Exercise everyday - walk/exercise for 15-45 mins everyday	Did stay on course for this for most part of the year. Walking around 30 mins 3-4 times a week in general. Started playing tennis regularly again after nearly 16 years of break. Now averaging 2 days per week.	· The walk needs to be more regular, atleast 5 days a week. · Make a walking plan. Review weekly. · Add jogging twice a week to the tennis.
2010	Spend more time with family and friends	Did pretty well on this front. Spent a lot of time with family and friends.	· Continued in 2011
2010	Read atleast 2 books per month	Did better. Over the year I completed more than 50 books. Bought an eBook reader and having a blast. Read a lot of books on psychology, physics, popular science, detective fiction (Hercule Poirot is my guru) and of course investment books Cut down on reading newspapers (stopped reading Economic Times & Business Standard after 10 years – now just browse through the epaper versions daily).	· Continued in 2011.
2010	Start practicing meditation	Started at the beginning of the year and stopped thereafter	· To start again in 2011 with 5 mins in the morning.

A few from my "Quote Hanger"

2010-12-08T17:19:00.000+05:30

"You have a choice. You are either too busy dying, or you are too busy living." -- Shawshank Redemption
He who fights and runs away, lives to fight another day. -- Old saying
It is the ability to foretell what is going to happen tomorrow, next week, next month, and next year. And to have the ability afterwards to explain why it didn't happen. -- Winston Churchill on the qualifications for becoming a politician
We have to do what we have to do, so that we can do what we want to do.
When you are content to be simply yourself and don’t compare or compete, everybody will respect you. - Lao Tzu

The New Market Bubble

2010-10-27T10:23:00.002+05:30

Is there a market bubble going on now? Is the markets going higher or lower? Should I put my money in the markets now? Will the markets crash? These are some of the questions I keep getting from people I know.

Manias, panics, excesses, whatever you may decide to term them as, rarely come gift-wrapped announcing itself beforehand. Just the fact that everyone around is so cautious negates the herd mentality and makes it more difficult for the market to crash.

So, does it mean, you should put all your money in the markets now? My answer to that is, "It depends...". Like in everything in life, investment is a very individual process and it is not possible to comment on personal investment decisions without having a good understanding of your aspirations, risk appetite, personality and other such traits. The best way to invest is to always look for undervalued stocks and periodically buying into them.

Does it mean that there is no bubble in the markets? Where is so much liquidity going? Where is the retail investor going? I think, that the next bubble is just starting. And it is in the PSU IPO space. Look at the response to Coal India. The company is not bad. But neither is it an absolute gem. It has stopped investing in deep-well coal extraction technologies a long time back and today does not have a good capability of extracting coal from very deep coal mines, which is typically the best quality. The "coal washing" process that the MD talked about is also not so easy to do. It requires huge quantities of water and involves a lot of pollution issues. Coal mines are typically not in areas where there is abundance of water, so it is not going to be easy. But no one is really concerned. The government having tasted blood is now looking to make their next bite. They will come up with other IPOs or FPOs. In the meantime, these PSUs will not have any autonomy of functioning. The OMCs (oil marketing companies) will again getting whammed as the oil prices go up and political compulsions push them to subsidizing votebanks again.

So, be wary of the PSU IPO game. Hope for the best but be prepared for the worst.

Indag Rubber:Seems like a value buy

2010-10-14T17:52:00.002+05:30

Here are the details of Indag Rubber:-

The company is the the tyre retreading business.
RoE is approx 32% and RoCE is 28.5%
FY10 Sales is 111 cr and profit is 11.5 cr
Market Cap is currently around 55 cr. i.e, Market Cap is lesser than prev year sales
Dividend Yield of 3.8%
Last 3 year PAT CAGR is 40% and Sales CAGR is 22%
Current PE is around 4.7

Notes from Annual Report 2010

Increase in raw materials has exerted pressure on operating margins
Expanded manufacturing capacity at its Nalgarh plant in Himachal
Precured tread rubber production is now at 1200 tons per month and 1800 tons of uncured rubber gum
Due to a increased demand of precured tread rubber, product accessories such as URSG and vulcanizing cement (both are basically the adhesive for pasting the tyres to the pretreads by the cold-bonding process) are also seeing increased demand
Manufacturing is at 100% capacity for these additives, but demand is much greater. The increase in capacity will cater to this demand.
Dividend of Rs 4 per share in FY 10
Competition: Tyre manufactures are also launching their own retreads
Company takes payment in advance or as PDC on delivery in most cases.
Auditors S.R. Baltiboi does not want to continue as auditors for the company.
Promoter holding is 34.97% and Directors & their families hold another 44.9%. So, in all, company insiders own nearly 90% stake in the company.
Rs 1.39 crores Income Tax is under litigation in the Delhi High Court from 1998-99.

Indian Markets - Crystal ball gazing

2010-10-02T10:35:00.001+05:30

Here is what I came yup with by crystal-ball gazing (the crystal ball is now pretty cloudy and filled with dust, but what-the-heck...it sure is some fun to look at it once in a while...

Sensex/Nifty will make a dash for the all-time high sometime soon (maybe as early as October end)
Either breach it or turn back just short of it.
A bout of profit booking follows. Indices go down 10%-15% (back to around 18K-18.5K)
Main indices remain sideways for the next couple of quarters.
Mid caps move up from now as the last few weeks the valuation gap has widened.
Sometime after 2-3 quarters, the next up move starts for the main indices. By that time, PE is down to about 22 (which is still high but certainly not hitting the roof).

One point to consider is that the 2008 debacle is still fresh in the minds of most people, and as long as it remains, the sentiment of fear will be there. That will prevent the markets from having a runaway rally or a breakneck fall. I sure hope I am right!!!

Note: The only problem with making predictions is that it messes with your thought process. It encourages the commitment and consistency bias and also the anchoring bias and thus creates a lollapalooza effect.

Default Strategy for Investment Helps Make Me a Better Investor

2010-09-13T13:31:00.002+05:30

For people who invest in the stock markets for the long term, perhaps the most critical point to note is to have a default strategy for action. This is a very overlooked part of investment and forces many otherwise brilliant investors to do foolish things. Most people tend to like action and that is why they buy or sell stocks to get into “action”. This results quite often in either selling good business too early (booking profits to satisfy the “action” bug) or to buy into questionable companies following a “tip” heard on TV(or from a friend).

I have the same problem. So, here is what I do to keep myself safe from the “action” bug. I have a default investment strategy. That is whenever I have money and do not have a company that I really want to buy, I buy into either a liquid fund (typically LiquidBees on NSE) or buy into an index fund (again typically NiftyBees on NSE). I chose a liquid fund when I don't have a good company identified and I feel the markets are overvalued. I chose a index fund in all other circumstances.

On the contrary, when I have a good stock I want to buy at a valuation I am comfortable with I sell either the liquid fund or the index fund and buy into the identified stock.

This approach has helped me a lot in stopping myself from doing stupid things. I hope it works for you too.

Balaji Amines - An Interesting Play on Specialty Chemicals

2010-09-12T21:06:00.001+05:30

I am in the process of studying Balaji Amines in greater details. Here are some of my thoughts.

From the AR - "Some of your company's new products are 100% import substitutes and other products are commanding 100% market share in India and are being exported to major customers worldwide" .... could not ascertain which specific products they are talking about.
Some of company's new products are 100% import substitutes and other products are commanding 100% market share
in India and are being exported to major customers worldwide. Di-methyl amino ethanol (DMAE) plant with a capacity of 10 MT/day was commissioned during the year. This process was developed through in house R & D Team of the company. This is a forward integration project for methyl amines plant and the product has good demand in the domestic and international markets.
To meet the increasing domestic and international demand, new plant for manufacture of GBL and NMP with a capacity of 50 MT/day is under construction. The plant is likely to be commissioned in FY11 which will contribute both to the top line and bottom line of the Company
The company has a 49% stake in Balaji Greentech (www.balajigreentech.com) which makes CFLs. It may not mean much now and also the numbers are not being consolidated.
Input prices (methyl/ethyl alcohol) - prices of molasses have reduced so they have made a lot of cost reduction. That may reverse once molasses/ethyl alcohol prices go up.
They are generating most of their required capacity of electricity through their captive power plants. Setting up one more 1.5 MW wind power plant this year as well. Given the power situation and cost in Maharashtra that may be a good cost -saving move.

I am not very comfortable about the diversification into the hotel business. They could probably have thought of something else for their land. But atleast they have got away from operating it and have got Sarovar to do it. So, it might not work out badly after all. But not very comfortable.

Also, their R&D costs are capitalized to a large extent (rather than expensed) which has the possibility of raising the PAT. But realistically, the impact is not very significant as of now.

Historically the debt-equity ratio has been over 1, although it is reducing a bit now, which is another red flag. But they seem to be doing well. I am expecting a yoy PAT growth of around 25-30% this year. Long term it may revert to its mean of 20%.

I am expecting an EPS of around 38-40 this year, so at a PE of 8-10, my expected target is around 310-380, which is a significant upside from the current level (220-230).

Supreme Industries - Interesting Play on plastics and Real-Estate

2010-09-08T14:51:00.002+05:30

Notes from Annual Report 2010

* The company expects to achieve 20%+ volume growth per year in medium term
* No significant change in product wise share of revenue
* Crisil has upgraded the rating outlook from A+Stable to A+Positive
* 1, 3 and 5 year sales growths are: 20%, 17.76% and 18.45% respectively
* 1, 3 and 5 year PAT growths are: 48.6%, 42.39% and 43.66% respectively
* Last 3 years average RoCE is 33%
* Last 3 years average RoE is 34%
* Long term Debt-Equity ratio has reduced from 1.02 to .49. This should reduce even more with the increased sale of the commercial building space.

PLASTIC PIPING SYSTEMS
* India's capacity for PVC resin is 67% of demand. Rest is imported.
* Kanpur plant's capacity to be expanded from 8000 tons p.a to 15000 tons p.a. Plant is to be commissioned by Dec'10
* Newly launched Lifeline CPVC grew more than 120%
* "Aqua Gold" plumbing system for cold water has grown by over 50%. It is successfully replacing GI pipes.
* Expects the renovation market to drive demand as more buildings undergo renovation
* Polyethylene pipes have grown over 100% by volume
* Exports have reduced by 9.21%

FURNITURE
* Growth of 26% by value and 23% by volume - indication of improved pricing due to better branding
* Planning new factory in Andhra Pradesh - plan to start production by end of 2010
* Plans to increase exclsuive franchise showrooms from 209 to 300 across India in 2010

INDUSTRIAL PRODUCTS
* Bagged all plastic body washing machine project from Whirlpool - production to begin by Sep'10
* Bagged order for manufacturing Tata Swach water purifiers from Tata Chemicals
* Expanding capacity in Noida,Gadegaon and Durgapur to meet Tata Swach requirements
* Volume growth of 25% and value growth of 20% - indicative of pricing pressure

PACKAGING PRODUCTS
* Volume growth of 24%
* New 5 and 7 layer lines are operating at 100% utilization
* Expanding capacity of the 7 layer line by over 50%+ (from 6000 tons to 9500 tons)
* Expecting a growth of 25% and expecting to reach full utilization by June 2010
* The Khopoli plant unit was the first and only multilayer packaging company to receive the BRC (British Retail Consortium) certificate to export to European markets.
* Very good traction seen in the construction and insulation business
* Growth in the insulation division impacted due to unavailability of skilled labour

CONSTRUCTION
* One block of the "Supreme Chambers" at Andheri has already been sold for 20.5 crs and negotiations are on for a few more.
* Commercial property offtake looks weak and it may take some time to sell all the units

Expected EPS (not adjusted for the split) for June 2011 : 70-75
PE range : 8-12
Expected price range : 560 - 900
Building sale : Expected sale price based on executed deal maybe between 270 to 340 crs. EPS from building sale may be around 108 - 136 (assuming the whole building is sold off in FY11).
Payout ratio is about 30% so its possible to see an exceptional dividend of Rs 30-35/per share.
Price of shares may go up significantly based on the property sale to adjust for one time income. That would be the cue to take profits.

Book Review - The Girl with the Dragon Tattoo by Steig Larsson

2010-08-16T19:31:00.002+05:30

The Girl with the Dragon Tattoo by Steig Larsson is the first part of the three-part Millenium trilogy that has become a cult series in the last few years in the mystery thriller genre. Larsson is the first author to have sold more than one million copies on the kindle store in amazon (that is, he has sold a million copies in the ebook format). So, decidely I was very excited when I got hold of my copy (I also read an ebook on my Infibeam PI).

The book has two main characters - Mikael Blomkvist, a financial investigative journalist and Lisbeth Salander, a young social misfit cum computer hacker cum investigator. Blomkvist rund a small magazine and tries to expose the misdeeds of a large businessman in Sweden. He also gets commissioned by an ageing patriarch of a large Swedish conglomerate to investigate the murder of his niece over forty years back. Blomkvist takes up the challenge when Vanger, the old patriarch, promises to give him evidence of some criminal activities by the person he is pursuing. The narrative takes on from there and goes through various twists and turns and ends in a predictive note.

I was, honestly a bit disappointed by the book. It started off really well and then somewhere in between it became quite predictable. Larsson probably tried to do much with the characters and in trying that the suspense was a casualty.

For people who are keen readers of mystery thrillers, this is a reasonably good read. Though I will not rate it as great. Maybe a 7 out of 10.

Taking a breather before starting on the second book of the series - "The Girl Who Played with Fire".

Portfolio Update: Six month's of measured performance

2010-08-13T19:11:00.004+05:30

After six months of starting to closely track my portfolio on an NAV basis, here are the results:

Primal Value Fund (this is what I call my fund)=30.03%
Sensex=12.48%
Relative Outperformance=17.56%

Book Review: The Polyester Prince by Hamish McDonald

2010-08-04T18:57:00.002+05:30

The Polyester Prince is a banned book. I am not sure why it is banned and after reading it I can guess. McDonald's narrative points fingers at the Congress government and some very senior ministers and leaders of colluding to help Dhirubhai in his endeavours. It is a fascinating read and goes over the life and time of Dhirubhai Ambani. It details the famous Dhirubhai versus Nusli Wadia battles, Indian Express' taking up the cudgel against him and focusses mainly on the dark side of the man.

The primary feeling that I had while reading was the author started with a negative bias against the man. In my opinion, no supremely successful business in a controlled economic regime can be either just black or white in character shade. He has to be some shade of grey. So, the book should have explored the various shades instead of focussing just on the darker side.

Another major issue with the book is that it tells very little of Dhirubhai Ambani the man and more of Reliance and its operations. For a biography the focus should be the man and not the company, although in some cases they are inseparable.

Book Review: Outliers by Malcolm Gladwell

2010-07-28T16:59:00.002+05:30

This book delves with the idea that super successful people are not a result of their innate greatness but a result of two factors - opportunity and cultural background. It shares stories of extremely successful men like Bill Gates, Bill Joy, Robert Oppenheimer, The Beatles and others and digs deeper to show that all these people had had an extraordinary opportunity which was not available to others at that point in time. So, there success cannot be attributed to their greatness but to their circumstances.

The book tries to debunk the "individualistic" model of success so popularized by the western media of the "self-made-man". Gladwell argues that there is no self-made-man and the success is a combination of the opportunities and culture (which includes the genes the person is born with).

The idea is not to demean the achievements of the super-successful people. It is not that they did not do anything. Obviously, to be a superlative success in anything, it takes a great deal of hard work and inherent talent. The only point Gladwell tries to make is that "luck" - for want of a better word - also plays a very crucial part in their success.

I would recommend this book. It gives a fresh perspective on success and its ingredients.

Primal Value Fund: My portfolio tracked as a fund

2010-06-28T20:41:00.006+05:30

After nearly ten years in the markets, I started tracking my portfolio as a fund this February. The idea was that if I was not making better returns than the index then it is better to invest in index funds and concentrate on other things in life. I started with a NAV of Rs. 10.

The objective of the fund is to outperform the Sensex on a long (3 years plus) term with securities chosen primarily with a focus towards value and mid and small cap. The idea is to have a concentrated portfolio of between 5-12 stocks at any given point in time with a investment horizon of an average of 3 years.

So far, as you can see from the chart, the Primal Value Fund has managed to outperform the Sensex. Sensex return has been 10.04% and the funds return has been 15.54%. So far so good. I will try and update the performance on a quarterly or half yearly basis.

Also providing the current portfolio and percentage allocation.

Book Review: Tim Ferris's The Four Hour Workweek

2010-06-21T15:50:00.002+05:30

Timothy Ferris' The Four Hour Workweek is a book devoted to people who do not want to spend the rest of their lives working in their cubicles. It makes a case for automating your cashflow so that you are no longer dependent on your job. It introduces the concept of freedom as one where you are both free from money and time pressures. Just having a great deal of money is not enough to be really rich, according to Ferris. You also need to have a lot of time to do all the things your heart desires.
Ferris makes a very compelling case for setting up some business major components of which can be outsourced to generate the free cash flow. He then goes into how to setup a "outsourced" business and life.
The book in this stage becomes a bit "silly" at times. Ferris, when he wrote this book was a 30-something person without a family. So, going away to foreign countries and staying extended periods may be possible for him but is practically not possible for most people.
What is important to learn from this book though is that there are a lot of things in life (and business) that you can really outsource and not feel any negative consequences at all. In fact, it would help get rid of a lot of unwanted "activity" - stuff we do just for the sake of it.

Overall, a good book to read.

Book Review: Classic Wisdom for the Professional Life By Bryan Curtis

2010-06-14T19:02:00.002+05:30

This is an excellent collection of quotes from mostly contemporary American personalities. What is good about the book is that most of the selected quotes are relatively fresh and are not overly quoted everywhere else!!
There were only two complaints I had were that i) the quotes are all lumped together and not grouped into categories so looking up a specific quote at a later point in time would be very very challenging and ii) the quotes are not really for the "professional" only, they are equally applicable to life in general. In fact, that is why this book makes it such a good read.

Review: My new ebook reader - Infibeam PI

2010-06-03T12:29:00.003+05:30

I bought a new ebook reader. It is the Infibeam PI (www.infibeam.com/PI) . I have seen and used both the Amazon Kindle and Sony ebook reader. The main reason I selected the PI is because it was available in India. I did not have to wait for weeks to get my hands on it.

I will not go into detailed comparisons between the three readers I have used. The reason I bought the ebook is to read books. Although that sounds rather a stupid thing to say, I found some features on Kindle quite superfluous to book reading. Like the space consuming keyboard. I dont know of any book which comes with a keyboard, so why should an ebook come with one. If I have to surf the net, I will use my laptop to do it.

The whole buying process was easy and seamless. Delivery happened within 3 working days. The only regret I had was my father was not there to see this. He was pretty excited with the concept of an ebook reader and I had entrusted him with the duty of checking the condition of the parcel when it arrived to make sure it was not tampered with in any way.

PI is very easy and intuitive to use. The reading is very clear and my impression was that it has better contrast than both Kindle and Sony e-reader although I may be wrong and the "endowment effect" may be working here on me. The device is pretty light and is easy to carry around and also to read while lying down (the only way I read books).

I had ordered a cover for the reader and that is the only part I was not fully satisfied with. The cover cost me Rs. 299 (about $6.5) and is actually pretty poor. It looks cheap and the quality is also not up to the mark.

But luckily, the cover is NOT typical of the reader. The reader is pretty good and the only feature I think that would enhance it's attraction is to have a touchscreen. I know that it would bump up its price a bit, but maybe it would be worth it.

Overall, even without looking at the price (cost me Rs. 9999 - about $222), PI is a great product and I would suggest all Indian buyers of ebook readers to try it before opting for a Sony/Kindle as long the latter are not available in India.

Life lessons learnt from my father

2010-05-18T12:51:00.002+05:30

The sense of loss has not yet gone. Others who have had similar experience insist it takes a while before it does. In one instant the feeling of having lost the roof over your head is not easy to get over. The last few days I was thinking of the lessons that Baba tried to impart to me, sometimes successfully and sometimes not so successfully.

Take care of your health
Save money. You never know when you will need it.
Spend as much time as possible with your family. Very little else matters.
Be a good father to your son. Always be there beside him when he needs you.
Take life as it comes. With all its ups and downs.
Perception matters. It is important to not only be good but also to look good.
Work might take to some foreign land, but that is not your home. Home is where you were born.
Be particular about your work.
Always maintain a checklist of things. He used to maintain a small notebook with him where he noted down things that he had to do.
Don't procrastinate. Do things as they appear. Don't wait for tomorrow. You never know what tomorrow brings.
Be independent.
Make as many friends as possible. A lot of them will drop out along the way.
Don't take unnecessary risks in life. They are usually not worth it.
Be content with what you have. Have no regrets in life.

45 minutes, 2200 degrees and the End of the Road

2010-05-16T10:58:00.001+05:30

Even at our birth, death does but stand aside a little. And every day he looks towards us and muses somewhat to himself whether that day or the next he will draw nigh.

Death is not extinguishing the light; it is putting out the lamp because dawn has come. - Rabindranath Tagore

Death is the one thing that connects us all. It reminds us that what's really important is who we've touched, how much we've given. It makes us realize that we have to be good to one another.

This Friday night baba (father) passed away. We watched TV and then had dinner together that evening. He went into the toilet and when he was not coming out after 10 minutes, ma (mother) knocked on the toilet door and when after a few knocks there was no response, I got a bit alarmed. I pried open the toilet door and there he was, lying down crouched on the floor. I lay him down very very quickly on the floor and tried his pulse. There was none. Ma by that time has called my Uncle (Jethumoni-my father's elder brother), who lives in the same but now partitioned house. By the time he came (in about 3 minutes) and checked for the pulse and heartbeat, I was sure father was no more there. I then called my wife who was at her parent's place for a few days. She was shell-shocked to hear it and she, alongwith her father and uncle came as fast as they could. By that time, didi and Arpanda (my sister and brother-in-law) had also come. So, did Subhajit and Ram-mama. Between me and ma, we called up most of our relatives and friends to inform them.

I spent a sleepless night my mind in perpetual rewind-and-play mode. The next day (yesterday) went by in a haze. We took him to the crematorium around 9:30 am and after the rituals of "mukhagni" he was put in the electric furnace, which I am told uses 2200 degrees Celsius.

So, after 45 minutes what remained of my father was the unburnt umbilical cord, which is floated away on the Ganges river, and more importantly a lifetime of memories spent with me.

A life spent loving and caring for his family. Where his family always, always came first. Love for perfection, always maintaining a mental checklist. Always reminding me (and others) of the pending tasks. There is so much that I learnt from him. The hunger and yearning for work and to learn new things was always there till the end. Even the last few years, he was trying to understand the stock market from me. He wanted me to open a demat account for him. I used to joke with him that he should first read and understand a few companies and give me some good recommendations!!

In the last few months of his life he derived the greatest pleasure from being with my two-and-a-half year old son. He loved him dearly, always talking about him and trying to teach him something. He used to tell me nearly everyday that it is the most critical to take care of health and wealth. He learnt it the hard way in his life. In his sickness, he has taught me more than I would have ever learnt.

I know today he is not there with me, but I equally know that he is with me. And will remain with me always.

Book Review: A Century Turns by William Bennet

2010-04-26T14:21:00.003+05:30

This book reads more like a novel than a piece of historical work. It captures the turn of the century and the political intricacies during the period of 1988 to 2008. During this period there were wars, changes in US presidency and great turmoil in the world. Bennet does a competent job of capturing them.

The book would have beeb much better had the author tried to go behind the reasons of historical events rather than just being a chronicler of it. So, in effect the books reads more like a collection of newspaper articles pieced together in a very nice fashion.

The Long and the Short of it!!

2010-04-04T13:31:00.004+05:30

Last week during our lunch break at work, we got into a discussion on why company executives are so hung up about short term performances instead of focusing on the long term improvement of the company. We see this everyday. Companies lay off people during bad times and then hire back with a gusto when business is booming, often at multiple times the compensation that was paid to the person who occupied the position before. This is so true in the IT industry in India. My friend, Amit, concluded that all this 'evil' was due to the "short-termism" created by being intently focused on the short-term stock value - the proverbial quarter end numbers. Amit attributes all that is wrong in the corporate system to this short=term view of life and the force that the stock markets exert on individuals as the incentive to outperform earnings is extraordinary.

I thought about this theory while driving back from work. I have a couple of objections to this line of thought (that the stock market is the creator and perpetrator of all evil).

My objection number one is that this cut-throat competition is present in companies that are not listed on the bourses. For example, in India none of the insurance companies are listed although they see cut-throat competition amongst its executives. Hence, the idea that the market is driving them to this level of competitiveness does not wash.

My second objection, or rather observation is that short term behavior is ingrained in us from our childhood. Here are examples where short term results outweigh long-term effort:

Exams in schools/colleges - Grades(marks) are all that matter for the future so last minute cramming to get better grades in okay. How many of us really care whether we learn something or not? We are all running after marks because that is only what can be demonstrated.
Elections - Again, no one cares for the long term improvement of the country. The incentive being created for the politician is to get and retain power every 4/5/6 years (depending on the country and civic body you get elected to). Long term goals are mostly ignored as real improvement most of the time can only be achieved programs that create short term pain. No one wants to cause that pain hence no real improvement happens. As an example, everyone knows that taxing agricultural income in India should be done as their are millions of extremely rich farmers, but no politician wants to do it because it will ruin his chances of winning the next election.
Immediate increase in compensation versus career growth - All managers and business owners are aware of this problem. Employees jump ship for hike in salaries and benefits and join the competition at the drop of a hat. Long gone are the days of employee-employer loyalty. Long-term career growth and development are increasingly taking a back-seat compared to short term jump in salaries.
Marriages versus live-ins and casual flings - Statistically, live-ins and casual flings have increased exponentially over the years as opposed to long term relationships (read marriages). Who wants to commit to a long term relationship when a casual fling is so much more hip-n-happening!

I could go on with numerous such examples. The point I am trying to make is viewing life short term or long term is a individual prerogative. Society in general creates incentives for the short term that are clear and visible. And since incentives for the long term and not as clear, it is more difficult for people to trust them. They are like the pot of gold at the end of the rainbow. You never really know if the pot is there.

The stock (or any other market) shows a mirror to your face. It tells you who you are. What your motivations are. It does not create those motivations. If you are a "short-termist" that is what you will see the world as. On the other hand, if you are a believer in the long-term that is what you will find. To each his own. Amen.

The Politics and Mindset of Entitlement

2010-04-04T10:52:00.004+05:30

Last few weeks, two important pieces of legislation were taken up by the Indian Parliament. The first was the reservation of one-third of the electoral seats for women and the second was the passage of the bill to guarantee education to children.

I am skeptical of both these. Let me tell you why.

A lot has been said and written about the women's reservation bill. Any form of reservation is, to my mid, a step backwards. Instead of empowering people to excel it creates a coterie of "entitlers" (if I may be permitted to call them that). We have seen this so many time is the past through the SC/ST and other similar reservations. It does very little to impact and uplift the poorest of the poor and is mostly cornered by the people who are at the top of such groups (the so-called "creamy layer"). Since, it is a difficult political setup, no one has the courage to challenge the status quo. It will be no different for the women's reservation. The seats will be cornered by a section of women and the broad-based participation that is being hoped for is going to remain only in the hopes and dreams of people. Also, there is no empirical evidence that women make better lawmakers or administrators to warrant such a reservation. For example, women politicians like Mayawati, Jayalalitha, Mamata Banerjee etc have not done anything significantly different from their male counterparts - either good or bad. Again, this moves seem to be done to pander to specific electoral benefits in mind.

The second piece of legislation - that of compulsory child education, is indeed laudable in its intent. What is missing, however, is clarity on the implementation of the bill. How will the state ensure that every child gets an education. Will it force the public schools to add thousands of children to their already existing load of students? What about their infrastructure? Can the crumbling in public schools cope with this huge influx of added students? Will the government force a quota (again a reservation) on private schools to take a certain percentage of students from the weaker section of society? Who will pay for their education?

There are thousands of such questions which are unanswered. It gives me a feeling that this is nothing more than a feel-good piece of legislature, that is never meant to be really implemented, but is aimed at electoral politics.

Business Outlook - Impact of Global downturn/recovery on the IT Sector

2010-03-29T21:36:00.002+05:30

The IT sector stocks have been on a sweet spot for some time now. The US markets were improving (or rather showing signs of not going into a depression) and some semblance of business sense were returning. This was getting reflected in the valuations of the IT stocks.
I think the party may be over for the time being. The currency printing frenzy in the US is more than likely to produce high inflation in the US and a weakening of the dollar. This is likely to impact the dollar arbitrage business fairly negatively for these companies.
I have no idea where the dollar-rupee exchange rate will go, but even a 10% weakening of the dollar (around Rs. 40 for a greenback) would mar the prospects of remarkably.
Now, let us think what what these companies can do to fend off the currency challenge.

It can hedge it's currency position (net zero hedge position)
Reduce it's onshore employee strength
Look to increase geographic diversification (spread off into countries like Vietnam, Philippines, Hungary, Romania etc) to contain the employee wage hikes in India
Move to more asset based (more reusable components in service delivery)
Try to get into product delivery as opposed to vanilla ADM (application development and maintenance)
Look for increasing revenue/employee (i.e. employee productivity)

I think there are clouds in the horizon for these companies. Prudent proactive management can stave off some of these concerns. Let us see what happens.

Business Moat - An Illusory Concept

2010-03-29T11:54:00.001+05:30

I strongly believe that moat as a concept is somewhat illusory. All businesses tend to become commodity after a point, when more and more competition sets in. Look at the business history over a 100 year period and you will find it very difficult to find companies which have sustainable business advantage. A case in point is newspapers. Even the great and venerable Warren Buffet used to think that his holding in Washington Post to be a bullet proof investment because in his own words "You can't beat a good newspaper business franchise". However, 50 years down the line Washington Post is struggling to make money. Times change, consumers change, preferences change. As in life, there is nothing permanent about business, other the promise of change.

Time Management from Michael Hyatt's Blog

2010-03-16T19:47:00.003+05:30

I saw a great post from Michael Hyatt today. It was about why we cannot complete our work. It's has some great tips. In fact, I can vouch for nearly all the 10 points as I practice them personally and have been greatly benefited. Read the post here.

Book Review: Liar's Poker by Michael Lewis

2010-02-27T11:57:00.002+05:30

I just finished reading Liar's Poker by Lewis, an account of the early career of a Saloman brothers bond salesman. The book captures the culture and work ethos of a famous Wall Street investment bank and exposes the motives of people who run the business. The fact that the whole business was managed with only short term goals in mind and the customer's interest came last (after personal, followed by Saloman's) is etched into the reader's mind. Also, the hypocrisy perpetuated regularly by the management exposes the emotions of how fear and greed works in the market.

Liar's Poker raises fundamental questions in the mind of the discerning reader. Are the interests of the customer ever foremost in the mind of the the broker or is the broker out to make a killing for himself and his firm? Are the tie-dangling MBAs hired by these brokers who walk and talk like financial wizards have any knowledge of the markets or are they just parroting what they have picked up second-hand from others who are equally ignorant?

Overall, a very good read.

Multi-disciplinary learning for Investing

2010-02-20T17:38:00.003+05:30

Education is something we are supposed to get in school (and college). However, the more "educated" investors meet, the more I come to suspect this. It's like what 'Rancho' in the film 3 idiots says, circus tigers are called well-trained, not well educated. I guess, the education system, the world over focuses on producing a plethora of well-trained people. The genesis for that, I suppose, dates back to creating workers for industrial factories.
What is really needed in life and in investing is multi-disciplinary learning. Learning and correlating various subjects and finding their real-life uses. Subjects that really help an investor is basic mathematics, algebra, probability, logic, philosophy, history and very importantly psychology. Unfortunatley, colleges that turn out MBAs teach very little of this. Arcane academic theories are as useful to an investor as a wooden stick to a tiger hunter in a dense forest - it's just not useful enough.
As Charlie Munger says, for an investor, it is imperative that he goes to bed to sleep in the night with a little more knowledge than he woke up with.

Book Review - Knockout Entrepreneur by George Foreman and Ken Abraham

2010-02-14T13:14:00.001+05:30

Knockout Entrepreneur by George Foreman and Ken Abraham was a decent read. It tries to relate Foreman's experiences as a heavyweight boxing champion and as an entrepreneur after his boxing career was over. It is always interesting to read about someone who is a high achiever in his chosen field (like Foreman in boxing) and then goes out to achieve success in another unrelated field. It proves that success is based on certain attributes like hard work, perseverance and the ability to think and act for oneself. This is as true in the boxing ring as in real or business life.
The book is simplistic in it's approach and readers who are looking for some guides on how to star a business will be disappointed. This is more of a story of how Foreman made it big in business rather than a how-to guide. The book contains mostly common-sense approaches to starting a business which is available in nearly all this type of books. People who know George Foreman and have some liking of boxing would find it an interesting read as Foreman gives examples that parallel his boxing and business life. Overall, a pretty average book.

Two most important questions of your life

2010-01-13T19:58:00.002+05:30

There are some very important questions that you can (and definitely should) ask yourself on a regular frequency. This aids in introspection. When people are in school or college they have term exams which help them judge if their progress on their education journey is reasonable. One of the problems of growing up is we stop asking ourselves that question. One probable cause is because we are not conditioned to ask questions of our progress ourselves. So, here is a ritual that I suggest everyone follow atleast once a year. It's best to choose significant days to do this like our birthdays, New Year or any such day.

What you need is a pen and a blank sheet of paper and a quiet place to sit and contemplate. With paper and pen in hand ask yourself the first question, "What would I do for the rest of my life if I won the lottery for xxx amount today?" The amount can be anything that you think is more than enough for you. Think about this. Write what you would do if you did not have to think about money. Would you still do what you are doing today? And think long term. Most people start by thinking they will do those things they are not able to do currently. But, after a little prodding they admit that they probably would not want to do it for the rest of their lives. So, think deeply. Take your time and write down what you would want to do.

Once you decide what you think you want, you have identified a very very important point. You have identified what you are really and truly passionate about. And that is very important. Most people die without knowing what they are truly passionate about.

Then ask yourself the second question. "What is it that stops me from doing these today?" When people do this, they are mostly startled to realize that not much actually prevents them from living their dream life except the fact that they have never really thought about it that way.

So, ask yourself these two questions. The answers may surprise you. Go ahead and live your dream life.

Book Review - Bill Bryson's Short History of Nearly Everything

2010-01-11T18:56:00.002+05:30

Last week I completed Bill Bryson's Short History of Nearly Everything. It is a good book that tries to cover in one sweep the evolution of natural sciences. It starts of from the creation of the universe and goes on to explain the universe, planetary systems and other celestial phenomenon. It then moves on and covers diverse topics like Physics, Chemistry, Biology and Geology. It takes the user through a journey of how each of these subjects of study evolved over a period of time and also it's more illustrious practitioners.
The book has very nice glimpses, in the form of anecdotes, into the lives of great scientists. It is a very good read and is sure to engage readers who are scientifically inclined.

Book Review: Parag Parikh's Value Investing and Behavioral Finance

2010-01-07T18:51:00.003+05:30

I just completed Parag Parikh's new book titled "Value Investing and Behavioral Finance". It is a very nice book with examples of equity mis-pricing by the markets based on fear/greed. It explores various mental models of behavioral finance. It makes nice reading because the examples are from the Indian markets so familiarity is high.
It has some interesting insights on index investing. Something that I had not known/thought about earlier. Parikh has put data from Sensex from 1979 to 2005 of stocks that were taken out of the index. The data suggests that companies that are taken out from the index have actually performed better over long term than the index!
It is a good book to read for long term investors, specially if you are interested in investing in the Indian stock markets.

Old friends reunite

2010-01-03T22:54:00.001+05:30

This weekend was great. Saturday we went to the Alumni Association of our school (AGCS). I met a lot of old friends after over 14 years. I met Irshad, Tabish, Hemant, Debarshi Ganguly, Durjoy Sengupta, Rajni and Kavita after 1995. It felt really nice to see these people.

Sandip (Das) is now in Calcutta for a vacation. So, today we met at Tung Fong, Park Street. Sandip and his wife, Sudipta and his wife, Biswajit and me. Sanjoy and Chotu came late, nearly the time when it was time for Bishu and me to leave.

It's nice and cold in Calcutta now, so it was good to go to Park Street in the evening. The good thing was I managed to come out without eating a lot, so the new year resolution is on track.

Resolutions for 2010 and beyond

2010-01-01T18:08:00.001+05:30

It is customary to make new year resolutions. So, here is my list.

1. Lose 5 kgs (or more) of weight - I have lost over 10 kgs in the last year. Down from 85kgs to around 75kgs now. Resolving to get it down to 70 kgs or less.

2. Exercise everyday (except Sundays - even God rested on Sunday!!) - Resolve to walk/exercise for 15-45 mins everyday.

3. Spend more time with family and friends - Add family time to the calendar!!

4. Read atleast 2 books per month - Make and maintain a list of books to be read.

5. Start practising meditation - Start working on meditating for atleast 5 mins everyday. Plan

These are my resolutions for 2010. Not too many. The trick would be to stick to them and make them work.

Market Mantras

2009-12-28T18:06:00.001+05:30

The markets tanked and then recovered in 2009. And what a recovery it was. Stocks have gone up 3,4 times in the last 6 months. Not the frontliners but some of the midcaps. The frontliners are just about back to where they fell from in Jan 2008. So, in a span of 2 years people who have stayed invested in the market are back to even. Those who had the guts to buy when there was mayhem around have actually made stupendous returns. But actually most retail investors have lost money. They came to the party late and left early, trying desperately to recuperate some of their losses!

The lessons from all this are:
1. Ignore the market. Focus on the businesses.
2. Buy when there is blood on the street (old jungle saying!!).
3. Sell when everyone and their uncles are buying (remember Reliance Power IPO?)
4. The money is made while buying, so make sure even if you get an average deal while selling, you still make money.
5. Over the long term, trading makes only one person rich - your broker!!

My Investing Mantra

2009-12-22T18:03:00.001+05:30

Over the last decade that I have been investing and trading in the stock markets, I have had the opportunity to try my hand at many approaches to make money. I have done long term investing (bottom-up stock picking), top-down stock picking, momentum trades, technical analysis, swing trading, day trading and derivatives (main options) trading. I have made and lost money in all of these endeavours. The only thing that I have gained in knowledge and an insight of what works for me in the stock market. And I have decided to stick to my knitting in the future.

Firstly, I have put some portion of my portfolio in exchange traded index funds to capture the index returns. I have invested in both the Nifty and the Junior Nifty ETFs.
For direct stocks, I am investing in companies with the following characterisitcs:
1. I look only at small or mid cap companies which can grow in the future.
2. Reasonably high RoCE or RoE with stable return ratios
3. Consistent record of sales and profits over years of performance
4. Easily understandable business model
5. Reasonable dividend
6. High portfolio concentration (although this might change in the future). Typically, I would not want to hold more than 10-15 companies.
7. Low PE (Less than 15...actually keep looking for PE less than 10)

The mode of investment would be to buy in monthly instalments on a regular(read monthly) basis coinciding with monthly salary. Do not look at market levels on a day-to-day basis. It makes no sense to observe markets daily. It numbs the sense of valuation. Instead, spend that time looking and catching up on good businesses. Think of which business would you want to do and why. Think of valuations on a market cap basis.

I think it is not a coincidence that people like Warren Buffet, Charlie Munger, Peter Lynch have made billions in the market consistently over the years. Independent research and thinking is the most important factor in making above average returns from the markets.

Make your own choice

2009-12-15T20:56:00.001+05:30

I have a lot of people ask me about what I think about career decisions. Some come to ask for job roles in foreign countries, some ask about how to get a different job role, some enquire about career progression and some others ask about how to increase their salaries! What I always end of telling people is make choices based on what you really think is important to you. Think long term. Think if five years from now the choices you make now will make a difference to your life.

Young(er) people have a tendency to look only at a short term view of life and don't really want to think about the long term. (It's like in the stock markets, traders think long term is six months!!). It's critical, to my mind, that people think long term - atleast have a plan for the next 3 years. There has to be a road map that you carry in your head or written down somewhere which helps you in the general direction you want to go. Unless, you know where you are going, you really cannot get anywhere.

All the people I have studied (personally and read about) have one thing in common. They were passionate about their work. They really loved what they did. Not always will you get all the opportunities that you wish for yourself. The idea is to keep going on the path that you have set for yourself.

Important to remember: The choices you make today will determine what you are doing tomorrow. So think and act.

Attitude makes the difference in life

2009-12-07T19:08:00.001+05:30

It has been nearly half a month since I am back from China. Interesting how time flies. The China trip was a great experience that something I would remember for a long time.I have bought a new Nokia E63 phone which I am using as my ipod as well so have downloaded a few audio books and listen to them while I drive to work. I have split the audio books in 25 mins pieces so I can listen to them comfortably while I drive. Most of the audio books are about personal leadership, vedanta(!!), personal finance and stock markets. So its a interesting experience to listen to these diverse topics.

I think it is good to listen to hear motivational podcasts/audiocasts on a regular basis. It really helps open up the mind to newer ways of thinking. I have always maintained the most important factor for success is a great attitude. That is the differentiator between someone who just 'floats' through life and someone who takes control of his destiny.

Final days in Chengdu

2009-11-14T09:23:00.001+05:30

We made our presentation to the Big Shoe Company. I thought it went pretty well. I presented strategy for online marketing to them. That is what I thought what they wanted to know the most. But selling shoes online is going to be fairly tough for an unknown brand. Once we were done with the presentation, we were back to the hotel and started working on our consolidated SME report.

By Wednesday we had completed the SME report and also the final presentation that we were planning to give Madam Bao Hui, a member of Chengdu Municipal CPC committee, and Chairman of General Labour Union. Loren did not want to present because he had one more presentation that day, so we egged on Vandana to do the job.

The final meeting with the chamber of commerce was in a swanky 5-star hotel. There was local media coverage as well. The President of the Chengdu Chamber of Commerce was there to greet us. We had four presentations on general themes which was concluded by the final SME report. Madam Bao then invited us for dinner. We had an usual large spread for dinner and really enjoyed the food.

With the presentation out of the way, all our work was done. Officially, our CSC program was over. We went back to the hotel around 8 pm and assembled in Ravi's room. We then had a great party with Black Label followed by Great Wall Chinese wine followed by innumerable cans of Tsingtao beer. Only Vandana and I were not in the drinking club but were happy watching. We played Uno and generally had a great time. Warner played DJ for us during the evening. The party got louder as the evening wore on. Around 1 am we finally called it a day (or night) and went back to our rooms to catch some sleep.

Friday we really had nothing to do. So we had decided that we would take the interpreters out for lunch. We came to know that shockingly Frank's father had been run over by a taxi a day before and he had not told us to make sure we were not upset. It was a shocking blow to us all.

After lunch at Peter's Tex Mex we went to the Tibetian market. It's a area of Chengdu where mostly Tibetians live. Interestingly, we saw that most of the incense sticks (agarbathis) were from India. Also, small Tibetians trinkets with labels of "Handcrafted in India" were being sold in the small stores.

After dinner at the Parkway Thai restaurant and thanking the owner (as she spoke English and had helped us a lot)we returned to our hotel. It was a quiet night with everyone retiring to bed early.

Loren and Ravi left for the airport at 7:30 am on Saturday. Mae and Lauren were here to see them off. Warner, Doris, Hina and Vandana went next at 10:30 am. They are going to Lhasa together for a week of Tibet tour.

The Big Shoe Company

2009-11-14T09:22:00.003+05:30

On Wednesday (11/4/2009), we went to visit the bigger of the two shoe companies. We were all hoping that like the first shoe company, the team would get another pair of free high-end shoes!! We went and met the son of the Chairman. He is very young and is in the process of taking over from his father. Their problems were also similar in nature: talent retention, management effectiveness and building an online shoe retail business. We will be going back to them on next Tuesday (11/10) and I will be presenting them on how to market shoes online.

What I saw actually put me off. I am not really very keen on working with this company. This company is the classical example of the "Chinese sweatshop". The workers need to work from 8 am till 10 pm everyday. For 28 days a month. They get only 2-3 holidays in a month. The pay is poor (average worker earns 1300 RMB) and typically stays less than a year. The company has no brand and manufactures shoes for a fairly well-recognized US brand. The company has no other significant client and has no other sales channel. So, for all purposes it's a captive manufacturing unit of the US brand. They just have a arms length from this company because they probably don't want to get involved in the bad publicity of a 14-hour workday.

The company is trying to sell some shoes online in China and having created a website just about 3 months back, have not managed to sell a single shoe! That is where it wants our help.

The Good Shoe Company

2009-11-14T09:22:00.001+05:30

Today we concluded our presentation for the first show company, one which we have termed as Shoe One. The presentation went really well. I discussed in detail about the importance of creating a business plan and how to go about creating one. The things to focus on in a strategic business plan and things to avoid. After me Vandana discussed motivation and HR systems. Loren concluded with a passionate discourse on building corporate culture. In total the presentation lasted for 1 hr 40 mins. The president then called for a break for the employees to get together and gather their thoughts before starting the question answer session. After a short 5 minute break we started the Q&A session and it went for over 1.5 hours. The questions and the candour felt very nice. The general manager herself asked most of the initial questions. Once the session got into full swing even other members joined the fray.

The Q&A over, the president and the general manager thanked us profusely and the president took us to their shoe display area. This was one fairly large hall filled with sample shoes. They asked us to choose a shoe for ourselves that he would custom-make for us. We were initially a bit hesitant at first although but after a while made our choices. Loren picked a brown Italian leather shoe and I chose a brown Nubuck leather shoe.

After the "shoe-ceremony" was over, the president took us out to dinner to what is supposed to be China's finest "Hot Pot" restaurant. Both Loren and I were a bit skeptical. Loren, because the last time we had a hot pot, he had an upset stomach, and I because of my toothache. We were assured that the president had ordered a mild hot pot (two on a scale of one-to-five for us). Anyway, we hardly had a choice in the matter as the reservations were already done. The restaurant was really swanky and looked really expensive. The cars parked outside were all very expensive ones - Audis, Mercs, BMWs. The restaurant was not a conventional ones. Instead of tables laid out, it only had rooms inside. The food was really nice. Another interesting fact in China is every time you finish food on your plate or drinks in the glass, it would be automatically refilled. If you don't want any more, leave your plate/glass untouched. We did not have any exotic food unlike some other days but mainly had chicken, beef, pork and mushrooms. I did not have anything out of the hot pot. I only had food from the mild pot which had a delicious chicken and mushroom soup.

During the dinner I asked the president if the working hours in his factory were normal. His workers work from 8:30 am to 6 pm. We heard from the other shoe companies that the general practice in the shoe industry was for workers to work from 8 am to 10 pm, 28 days a week!! That's why Chinese factories are called "sweatshops" the world over. I am not sure how China wishes to compete in the future with this setup. The technology is poor and the companies are just throwing cheap labour and squeezing the last ounce out of them. India atleast is competing with better technology and more skilled resources. Anyway, thankfully, this company does not believe in exploiting their workers. The president said I cannot talk to corporate social responsibility without first taking care of my workers. I somehow really liked him. He must be a multi-millionaire but has a very humble and down-to-earth air about him.

With this we completed our third client assignment. Only the bigger shoe company remains for week 4.

Meat, meat and more meat!!!

2009-10-30T19:41:00.001+05:30

Today we went to the electrical company to present our recommendations. The presentations went really well. Loren did a great pitch on developing marketing channels. I really like the way he puts a lot of effort in his preparation. That's an important lesson to be learnt. After Loren, I did my pitch on production planning followed by Vandana on HR team motivation and best practices. The finishing touches were provided by a very passionate pitch by Ravi on branding.

After we were done, the General Manager thanked us profusely and took us out to lunch. This was perhaps the largest mean in China so far in terms of variety. The dishes included baked fish, sardines, oysters, crabs, prawns, chicken, pork, beef, duck, frog, rabbit and other vegetables. In total, there were about 24 dishes, give or take a few!!

While returning Lauren helped me pick up ibuprofen and a Chinese mouthwash for my toothache. After taking the medicine it feels a bit better now but the soreness remains.

Tomorrow we leave Dujiangyan early in the day and go see to the mountains and the irrigation system and then head back to Chengdu.

Last few days

2009-10-29T09:00:00.001+05:30

The last few days I have been really busy with work so did not get a chance to update my blog. After we came to Dujiangyan we spent the rest of the day more or less lazing around. The hotel we are staying looked really nice at first. It's the Tiandiren Business Hotel and the rooms looked really cozy. It was later that we realized the food (breakfast) served is awful. Loren and I bought marmalade from a nearby store and we have Chinese bread with it everyday. Also, there is warm orange juice (never had warm juice in my life!!), and fried eggs. I call them the "saviour eggs". Then we also have eggs boiled in green tea, which should been tasting different as per the local people here, but tastes the same to me as any other boiled egg in the world.

We have "discovered" a small Chinese fast food restaurant close to our hotel where we have been going for our food. The place has good fairly good food. The chicken and mushroom rice was quite like the Chinese food we have in India, with only a kilo of oil extra!! yesterday, we tried a newer version of Hot Pot, called the Dry Pot. It was pre-cooked food put in a pot over an oven on the table. The food was really spicy, but I think I am getting used to the spice. The Sichuan peppercorn explodes like atomic bombs in your mouth if you accidentally bite into them, leaving your mouth and lips completely numb.

Back at work, we visited a large electrical apparatus manufacturing company. I will never forget the treatment that we received there. We were treated like royalty. We were the "experts". The board room was filled with all the senior management team including the board members and the Chairman of the company. They explained in details the problems the company was facing, shared their company confidential 5-year strategic plan and took us on a factory tour. They also took us to an amazing lunch were we had 24 courses. Trust me. I counted. Since they were so serious about us, we thought it would be really good if we could give them some good recommendations. We have been working on our presentation since then. We are nearly done and have given it to Lauren for translation.

Pandas, Pauguang Monastery and Jinshe Museum - Sunday Sightseeing

2009-10-29T08:59:00.001+05:30

Today we spent the whole day in sightseeing. We left Chengdu early morning. Well, not really early morning. It was around 9 am when we left the hotel and got onto the bus. I was surprised to see the driver wearing a red IBM jacket. It seemed it was presented to him by an IBM group that he had taken on a tour previously. We first went to the Panda zoo. The weather was extremely foggy and damp. So, we were told that most of the pandas may not be coming out and playing in the open. After walking (and it was steep - like climbing up in a hill station) a fair bit, we did spot a few pandas. We were lucky to see about 10 pandas including red pandas. We then went a saw a nice short documentary on the life of the pandas.

After the panda zoo, we headed towards the Pauguang monastery in Chengdu - the 4th largest in China. It was really beautiful. The startling thing there was the food. We ate at the canteen run by the monks there and all the food was vegetarian. But, the dishes looked and tasted like non-veg!! Like there was tofu which looked and tasted so much like pork that it would really be difficult for people differentiate it from the actual fare. Similarly, potatoes in the guise of fish, tofu masquerading as beef was absolutely delicious.

We then went around in to the inner chamber which contained a lot of statues with inscriptions at the feet. We were supposed to count steps depending on age and the statue that would match ours was supposed to provide details for us. I statue said "Wisdom". Not sure if that means I am wise or if it means that's what I need most :-)

After that we went to the Jinshe Museum. Here we saw relics of the Sichuan area of around 1000 B.C. It was fascinating to see the objects that have been uncovered here. It was similar to Mohenjodaro and Harrappa but I doubt if we have done such a nice job of creating a huge museum and show casing it to the world.

We are now in Dujiangyan city and will remain here for the next week. Tomorrow we go and meet the electric supply company. Hoping that we can help them in their quest for excellence.

A Small & Medium Enterprise: Our First Client Visit

2009-10-20T15:43:00.000+05:30

Yesterday, we went to our first client visit. Loren, Doris and I were accompanied by our two interpreters who had actually setup the meeting. The company had sent a 6-seater Buick for us. We drove for about an hour before we reached the company. The office was located in a pretty shabby neighbourhood. But the office and factory itself was very very big and swanky. I was, in fact, very surprised to see such a large campus for a supposed SME. The company was the largest private sector player in its domain and was planning an IPO in the near future.

We were welcomed by the CFO, Vice President and Head of Corporate Management. We were served with Jasmine tea and hot water! Then we went through a preliminary introduction of the company's profile. We were also shown a video about the company that was fairly comprehensive. Then we went into a detailed discussion about the company's operations, challenges, future strategies and growth plan. It was a fairly detailed and frank discussion. It appeared that the top management was very clear on the challenges that the companies face. After the discussions, we were invited to a lunch and were driven to a restaurant a little distance from the office. It was fish-specialty restaurant and we had about six dishes of fishes. A couple of them were very spicy. The food in general was good.

We went back after lunch to the office and talked to the head of the marketing, HR and International business. We discussed their plans and challenges in detail.

After the work was done, we drove back to Chengdu and went to Starbucks for a cup of coffee. We started working on the presentation for the company and did a fair bit of research. For dinner, the consensus was that the team had a lot of Chinese food and would go and have something "familiar" so went went to Pizza Hut. I had a veg pizza and Wurberry juice. It was nearly 10 pm before we returned to the hotel and went to sleep.

Today we started working from the morning and have nearly completed the presentation that we are to give them on Thursday.

Hot Pot, Welcome Dinner from DOT and sight seeing in Chengdu

2009-10-18T19:38:00.001+05:30

Yesterday (Saturday) afternoon Loren, John and I went out in search of lunch and thought we would get into KFC. There was a Japanese fast food joint right next to KFC called Tonya - which apparently means "Three Pigs" in Japanese (translation courtesy Kenji). I had Eel rice and Miso soup. The food was pretty good and very cheap. Only 25 RMB. We then came back and after a while all 7 of us (Ravi, Vandana and Hina had still not joined the team) decided to go and walk around Chengdu. Zach and Belinda were our local guides. We started at around 2:30 pm from the hotel and walked around Chunxi Lu and also the main town square. We kept walking and walking and walking. I think we walked till about 6:30 pm. I have not walked so much in a long time. But it was not very tiring because the weather was pleasant, maybe a bit on the colder side.
After all that walking we decided to have Hot Pot for dinner and walked some more to find a restaurant. Zach and Belinda did not have much idea so they asked around to find a place. Finally when we did find a place, we were put in queue at number 13. The waiting area had small tables with cards on them. People who were waiting for their turn to get a seat in the restaurant were all playing cards. Zach told us that the Chinese love to play cards and also quite a few gamble.

The Hot Pot was an experience. It is basically a kadhai- a pot with two chambers. Both the chambers have chicken or vegetable stock in it. The inner chamber has no added spices so is not "hot". The outer and the much larger of the chambers ad dry red chillies and Sichuan peppercorn and other hot spices boiling in it. The pots were put on the table at the center and had a gas oven below it which boiled the contents of the pot. The menu is a pick list of over 400 items and most of them are served raw or semi-cooked. The idea is to take the the items and put them in the pot and let them boil in the spiced up stock. Then you have to take it out and dip it in oil (I think it was sesame oil) and have it. The first effect of the "hot pot" is it makes your mouth, lips and tongue go numb. You have a burning and tingling sensation in the mouth and after a few bites you basically lose the sense of taste. The ingredients we had to put in the hot pot were as varied as potatoes, tomatoes, duck tongues & intestines, stomach lining of a cow, bird eggs, pork ,beef, chicken, pomfret and shrimps. I don't know if I missed anything. One thing I have noticed here is people order a huge amount of food and a lot of it is leftover. I need to check if its a cultural thing here.

An interesting observation here is that sunrise happens about 7:30 am in the morning. I happened to get up around 6 am today and it was dark outside, so I went back to sleep and got back up at around 8:15 am. Today morning the missing trio of Ravi, Vandana and Hina also arrived and joined the team. So, now our team is complete. The breakfast was the usual fare and I had bread toast today. We went to Starbucks after breakfast to get a familiar version of coffee. Today afternoon we went to a nice sit-down Japanese restaurant and I had braised chicken with rice. I could not eat even half the rice that was on the plate.The portion size is pretty big here.

The whole afternoon we spent in meeting the DOT team. Frank and Leslie presented us the overview plan for the next 30 days. The work should be fairly challenging.

Frank gave us our per diems for the entire tour and also explained the basic logistics. After the briefing, frank took us out to dinner. The place was really good and again had a huge amount of food. We had "squirrel fish" which was a fish cooked and carved in the shape of a squirrel. Also on the menu was another very famous dish - the Beijing Duck. Its a duck dish, unlikely the Bombay Duck which is a fish!! There were other dishes of pork, beef, fish, chicken and tofu. I tried to count and I think there were about 14 different main courses on the table!! As usual, probably half of it was left over. I have started managing with chopsticks a bit better than before. Today, in fact, I had my whole dinner with them, even though I had asked for a fork as a backup plan.

Tomorrow, we start around 8:30 am and need to travel for about an hour to meet our first clients.

China-Day 1

2009-10-16T18:05:00.001+05:30

From Bangkok Airport
I am sitting and penning this down in the Bangkok airport. My flight, for the first time in my life, was 50 minutes ahead of schedule! After getting off the flight, I had to walk what seemed about a 1.5 kms to get to terminal C3, where I sat down waiting for John to arrive. He arrived within a few minutes and we started chatting. Before joining IBM, he was a school teacher! Now he works with the GMU team in STG. We went and had coffee together. My cold coffee had too much cream and a lot of ice-cream in it!! My stomach am still filling full. This is after a decent late night dinner (1:45 am) served in-flight from Kolkata to Bangkok. The braised chicken was really nice. I had diet coke to go with it. Need to keep a check on my calories. Have made a lot of effort this last year to lose over 10 kgs, so cannot just pile them back on. It's 8 am in Bangkok now and John and I are waiting for our connecting flight to Chengdu which starts boarding at 9:35 am.

Chengdu
Reached Chengdu right on time. Mae was waiting for us at the airport. She is one of our interpreters and speaks quite well. She had spent one year in Britain which is why her English is really good. We did not have any problems in communicating with her. We took a taxi (an old Volkswagon - most taxis here seemed to be VW) and it took us about 30 minutes to get to the hotel.The hotel "Minshan Ane Grand Hotel" is bang in the center of the city. It has only walkways around it, so no vehicles are allowed. It has only stores and restaurants on both sides of the streets. We did not want to be too adventurous today so went for a standard McDonald grilled chicken sandwich. It cost me 13RMB. Not sure if that's high or low. It's approximately $2 (or Rs. 100), so I think it was a reasonable price.There are a lot of small/large Chinese restaurants around here.
The hotel has reasonably good internet connectivity. I can connect to the IBM network. The hotel front desk said I had to deposit 200 RMB to call India. Instead of doing that I got onto the IBM network and sent a instant message to one of my teammates. He called me and also informed my family that I have reached safely. My wife and parents called me on the mobile that DOT has provided me with. Incoming calls to mobiles in China are free like in India. So, I think we can remain in touch for the duration of my stay in China.

Leaving for China today

2009-10-15T09:42:00.002+05:30

Tonight I will be leaving for China. Packing is complete, courtesy my wife :-) I almost was making a mess of the start. My flight from Kolkata leaves at 2:30 am on Oct 16. I was under the impression that my flight was on Friday night. I was telling about my itinerary to my father-in-law and he told me that Oct 16 2:30 am is Thursday night and not Friday night as I was thinking. I immediately realized my mistake! So, spent fast-forwarding all my pre-travel arrangements by a day. Now, more or less everything is done. Just need to get some sleep in the afternoon as its unlikely that I will get any sleep in the night.
The toughest part of traveling on work is leaving the family behind. I specially miss my two-year old son. I spend most of my free time playing with him or talking with him. so, will miss him a lot. Next post will possibly be from China!!

A week to go for the in-country assignment to start

2009-10-12T18:31:00.002+05:30

Just a week to go for the CSC China team 5's in-country assignment to start. I have already received my Chinese visa. Now we have received information about our hotel bookings in both Chengdu and Dujiangyan. I have also got my e-tickets for a Thai Airways flight from Kolkata to Chengdu via Bangkok. The only thing I need to do is to pack my bags, which I think I will leave for the last day :-)

Work Routine in Life

2009-10-10T15:00:00.001+05:30

Some people need to have a well-defined routine in life. They follow that routine diligently and any deviations from it are despicable. For others, routine is abhorring. They much rather “go with the flow”. I am in the first group. It is important for me to have a well-defined routine. I get fairly disturbed if my routine is interrupted or disturbed in any way. I am open to changing my routine over time, but it is usually not a sudden impulsive change.

Knowing myself, I have set about to fix a routine for myself which will help me put focus on my life's priorities: Health, Friends & Family, Career and Money.

Here is the outline of the plan (open to changes):

Weekdays

Between 6:30-7:00 AM – Rise and Shine :-)

7:00-7:30 AM – Walk for 30 mins

7:30-8:15AM – Daily dose of Newspaper (Telegraph, Business Standard, Anandabazar Patrika)

8:15-8:30 AM – Breakfast

8:30 – 9:00 AM – Get Read for Office

9:00 – 10:00 AM – Drive to Office

5:00 – 6:00 PM – Drive back from office

6:00 – 9:00 PM – Conference calls

9:00 – 9:30 PM – Dinner

9:30 – 10:00 PM – Family time

10:00 – 10:30 PM - Reading

10:30 PM – Go to sleep

Weekends

Between 6:30-7:00 AM – Rise and Shine :-)

7:00-7:30 AM – Walk for 45 mins

7:30-9:30 AM – Daily dose of Newspaper (Telegraph, Business Standard, Anandabazar Patrika)

8:15-8:30 AM – Breakfast

9:30 – 10:30 AM – Read Magazines (BusinessWorld), Watch TV

10:30 – 12:30 PM – Family Time (Play with Neel)

12:30 – 1:00 PM – Lunch

1:00 – 3:00 PM – Afternoon Siesta :-)

3:00 – 4:00 PM - Reading, Watching TV

4:00 – 9:00 PM – Watching TV OR Visiting friends & Relatives, Shopping, Eating Out etc

9:00 – 9:30 PM – Dinner

9:30 – 10:30 PM - Reading

10:30 PM – Go to sleep

Improve your work productivity: Take a break, Do Less!!

2009-09-28T19:26:00.004+05:30

The trick to working better and improving work productivity is not to work harder and burn the midnight oil as some would think. It's to take a break and also to do less!

This has been something I have been trying to tell all the people who work with me. It's important to do LESS and do it better than to take on too many things on hand and then deliver poorly. And now, Harvard Business Review has a research report out that confirms this view. You can find the link to a detailed report here on the Wall Street Journal

So, focus on quality of delivery. Do less. Learn to say NO to tasks building up to overwhelm you.

It's all about money, honey!!

2009-09-25T19:30:00.000+05:30

A very interesting event is on these days. Professors of India’s elite institutes IITs and IIMs are protesting in unique ways like day long fasting to protest what they are calling an injury to their autonomy of recruiting good teachers and pay scales. I think this is a farce. This is just a way to arm twist the HRD ministry to increase their salaries. I have nothing against the IITs, IIMs. In fact, I have had the opportunity to study in one of them. But, what make those institutes great are its students and not so much its faculty. If you gather together some of the best academic brains in the country in one place, you don’t really need excellent teachers to produce great results. In fact, excluding very few of the faculty most others are of very ordinary standard. But then again, that’s true of every university, college in the country. That is one of the main reasons why we have not seen any great research work come out of the IIT/IIM system. Whatever good comes out the institutes is courtesy the efforts of the students.

Their contention is that they are not hankering after money and that they should be differentiated from others of their ilk because they are a superior breed. It would be very easy to call their bluff. The HRD ministry should ask them publicly that they would be positively differentiated and their salary would be more than their peers in the university system by one rupee. If this hankering is not for money, the teachers should accept that and continue with their work. But, if, as everyone suspects, it is about money, then their lie will be caught!!

Welfare State on the Death Bed

2009-09-21T17:06:00.002+05:30

Today, for I had the "fortune" of visiting the largest and supposedly the best government hospital in Kolkata. I had gone there with my wife to visit one of lab assistant's who works in her college. While she went to meet and enquire about the condition of this person, I was walking about on the ground floor emergency ward. What I saw shocked me. This was the first time that I actually have been to a government hospital and the condition was simply deplorable. It was dirty, with paan stains all over the place, overcrowded with people, with patients lying on stretchers on the floor, and with a disgusting and nauseating smell emanating from every corner. If this is the condition of the "best" hospital then I shudder to think what is the state of the other more ignominious ones!

This got me thinking about the concept of a welfare state - a haloed concept popularized in India by the founding fathers of our country. The problem I, and a lot of pragmatists like me, have with it is that the welfare state is not able to fund itself. The government cannot run any institution of quality unless in the long term its economically viable. If it tries to do it, like in India, the quality suffers drastically. That is pretty evident in every sector where government institutions are a monopoly. Be it hospitals or schools or transportation or industry. The pathetic state of affairs in each of the areas mentioned are a testament to the fact that a public body is not the best mechanism of service delivery.

So, what are the solutions to improve government hospitals in India and turn them into centers of excellence? To answer that question, we need to first ask what are the problems that plague these institutions. They key problems are:
1. Doctor/Nurse to patient ratio (overcrowding)
2. Lack of physical infrastructure (number of beds)
3. Very little modern medical equipment
4. Revenue to cost ratio on a standalone hospital basis

The solutions are also possible, but needs political will to push through. Solutions could be:
1. Increase medical and paramedical colleges to increase the availability of doctors, nurses, paramedical staff
2. Pay market rates to doctors for working in government hospitals
3. Tie-up with large generic pharmaceutical companies to supply drugs at a bulk rate. Ensure that drugs are always available or can be procured quickly in times of need.
4. Most government hospitals are spread out on large tracts of land. Vertically increase the capacity on the same land. That is, make multi-storied hospitals in the land where the current one/two storied buildings are.
5. Get better equipment and train staff to use them effectively.
6. Tie-up with medical insurance companies to educate people about the need for medical covers. Sell medical insurance covers to people. This will increase the reach of the insurance companies and also a lot of poor/ middle class people will be able to afford them if they are educated adequately.
7. And finally, charge people reasonable rates to cover costs.

The last point is the most crucial. Unless, costs can be recovered adequately, everything else will fail. I strongly believe if people are educated about the benefits of medical insurance, a lot more of them would opt for it and then they would be in a position to pay for the medical treatments.

Idea: Walk and Talk

2009-09-04T11:21:00.003+05:30

Recently, Idea Cellular has been running an advertisement starring Abhishek Bachchan as a doctor who suddenly with an idea of asking people to walk and down. At the end of this rather humorous ad, Abhishek Bachchan is seen swatting flies as he has no patients anymore. Everybody has become "fit" after walking and talking!!

I liked this ad for its humor quotient. Then one day, when I was struggling to find time for my daily walks, I realized that I could implement this in my life. I have a few hours of conference calls in the evening every weekday. So, I had a great opportunity of utilizing some of this time for my daily dose of walking. And that is exactly what I am doing now. Last couple of days, I have been doing 40-45 mins of walking during my calls (ones where I am there more as an FYI and not an active participant).

I really think its a great way to utilize the time and stay fit at the same time.

Goals for my Corporate Service Assignment

2009-08-07T16:28:00.000+05:30

My goal for the CSC assignment is to:

Be part of a global high-performing team to help organizations who in normal course would not be able to afford IBM's services
Build long lasting relationships with the team members
Explore, understand and appreciate the Chinese culture (both social and work)
Work on a project with a "different and unique" flavour

Beginning education for CSC assignment in China

2009-08-04T14:39:00.003+05:30

I have been placed in the China team for IBM's CSC (Corporate Service Corps) program. There are ten members in the team from different countries. We are supposed to be travelling to Chengdu in the Sichuan province during October-November. The program has a three month preparation period during which we need to learn about various things. For example, during the first month, we are supposed to learn about the team and also start learning about the Chinese culture, economy and business.

Till date we have had two meetings (these days early all meetings are "virtual", telephonic ones) in which we have had a chance to interact with our team members. We have also been assigned a team mentor (someone who had been to Chengdu as part of a previous CSC group).

For greater details, you can look at www.ibm.com/corporateservicecorps

13 years to become an expert

2009-07-28T20:43:00.001+05:30

In Malcolm Gladwell's book Outliers, a study done by Anders Ericsson on violinists shows that it takes about 10000 (ten thousand) hours of practice to become an expert at something. When I read this for the first time, I was fascinated by the fact that it takes such a long time of dedicated effort to become really good at something.

Today, I was reading a book on trading strategies and it mentioned that a traders life is divided into decades. The first decade he makes his mistakes, the second decade he makes his money and the third decade he enjoys the money.

That set me calculating and trying to tie Gladwell with the traders cycle. If a person spends 3 hours per day for 5 days a week for 52 weeks a year, he will need about 13 years to be an expert at trading. And that is assuming that he is passionate about it in the first place. So, now we know, why we haev so many people failing as traders. It's just that they have not served their time as yet!!

The Indian Mutual Fund IPO Rush has started

2009-07-24T17:32:00.001+05:30

The game to gather the maximum amount of money before the new SEBI regulation of not allowing any entry loads (and consequent commissions to distributors) kicks off on August 1 has started in earnest. nearly all big fund houses are running after new IPOs with fancy names to gather as much money as possible to rake in the moolah. They are afraid of losing out on business after the new regime starts. Then only funds with "superior" short term performance will be able to get more money from investors and other funds whose performance is lacking will not be able to "bribe" their way into investor portfolios. In the existing system, large distributors promise fund houses large investments in return of hefty commissions (6-7%) and foreign trips etc. All this comes from the entry loads charged by the funds to its investors. Fund Houses choose this route to bring in money as their revenues depend on the assets they manage as fund management charges are a percentage of the totals AUM (assets under management).

Since, SEBI has put a stop to this practise nearly everyone is trying to get in as much money as possible and then hold onto it by increasing exit loads. Most fund houses have increased exit loads in the last month stating that its good for investors to remain invested in these volatile markets and not take a directional call!!!!

So, beware of the new IPO rush. Wait out for a few more days and choose a fund base don its merit and not becuase someone is selling it ver hard to you.

Resolution on a Birthday

2009-07-19T22:55:00.005+05:30

Today was my 33rd birthday. I was thinking of making a few resolutions for my year ahead. My so-called "New Year Resolutions". Instead, I thought that I will make only one resolution and then track its status on my blog to see how I am progressing on my commitment.

So, I have resolved this year to reduce my weight by another 10 kgs. (I have reduced about 10 kgs in the last year, so its not as improbable as it sounds). My current weight is 77.8 kgs and my July 19, 2010 target is 67-68 kgs.

To start off, I created my walking plan using the free online walking planner from the American heart Association's website http://www.startwalkingnow.org

My target body weight is around 63kgs, so if I am able to reduce the 10 kgs it would be really great for me.

The main trigger is to ensure overall better health and that I do not land up with a heart attack at 50.

Stumped by Randy Pausch

2009-07-19T19:46:00.002+05:30

I was watching Randy Pausch's lecture on time management on youtube. IF youhaven't already watched it, I suggest you do. Here is the link:
http://www.youtube.com/watch?v=oTugjssqOT0

There are a few of Randy Paush's videos in youtube including his, bu now famous, "The Last Lecture." He is an amazing speaker and I have listened to a couple of his lectures over a dozen times.

In the Time Management lecture, Randy refers to doing things you really love. He said make a list of 100 things you want to do before you die. His clarified that the number was not cast in stone but was merely a starting point. I thought about it for a long time. Deeply. And guess what, I was struggling to out even one item on my list!!

This came as a rude shock to me. It means all my childhood dreams and passions have somehow left me (or lying dormant deep inside me) in the fast-pace of life. I asked a couple of my friends and most had trivial things to say like "world tour", etc..nothing which, I guessed, had any deep meaning to them.

I suggest that you also stop and think about it. Think about all the things you want to do in life before you die.

Something new

2009-05-16T18:35:00.000+05:30

Today something new has happened. In this Lok Sabha elections, for the first time during my living memory, I have seen a comprehensive defeat of the Left Front in Bengal. Mamata Banerjee has managed to join hands with the Congress and has managed to get 26 seats out of 42. The last time I think that happened was before I was born!!
Let's see what the new team does for Bengal and Calcutta. We need to get a lot of development done for Bengal and Calcutta.

Building a mid-cap, small-cap portflio

2009-05-14T11:03:00.000+05:30

I am thinking of building a mid/small cap portfolio of not more than 10 stocks with a part of my monthly investable surplus. The strategy that I have thought of is to have a 70:30 debt:equity ration. So, I will be putting about 30% each month in either a recurring deposit or PPF. The rest of 70% I am planning to break up into two chunks of 40% and 30% each of mid-cap/small-cap stocks and equity mutual fund SIPs respectively.
In the equity mutual fund space, I think I will focus more on large cap funds like HDFC Equity, Franklin Templeton Prima Plus and Reliance Vision with an allocation of 10% each.
Amongst the stocks that I am currently looking at are:
1. Opto Circuits
2. Sintex Industries
3. Yes Bank
4. Sundaram Transport Finance
5. Bartronics
6. ICSA
7. Everest Kanto Cyclinders
8. Power Finance Corp
9. IDFC
10. Voltamp Transformer
11. Punj Llyod
12. Savita Chemical
13. Pidilite
14. Blue Star
15. Voltas

And maybe a couple of cyclicals/special situations like Tata Steel, Tata Motors, Grasim, Ambuja Cement, McLeod Russel etc.

The idea is to look for growing companies which can deliver superior returns over a 3-5 year horizon. Companies with high RoE/RoCE, + cashflow, stability of earnings, industry scalability is something to be looked at.

Markets move down

2009-05-08T20:43:00.000+05:30

Today the market corrected about 2%. And I was overwhelmed with greed and bought Essar Oil from a trading perspective. The trade till now has not gone as per plan. It is down about Rs 6 from a purchase price of Rs 160. I have a stop loss below 152 (yesterday's close) and a target of 170. Let's see how the trade plays out.

Election results and markets

2009-05-07T16:07:00.001+05:30

Every one seems to be of the opinion that India is going to have a fractured mandate in the elections and the market will correct 10-20% after the results are out. The percentage of the fall is to be determined by the group that comes to power with the maximum fall reserved for a combination of the Left and Mayawati!!
I wonder. In my experience markets rarely, if ever, oblige the popular opinion. Will the markets see a steep decline or will it witness a runaway rally? Only time will tell. For you and me, its best we reserve some cash to take care of opportunities that may come tomorrow.

Market Corrects

2009-05-06T16:16:00.000+05:30

Looks like the Nifty going to take a 100-150 point downward journey from here. There was a fair amount of profit taking at the end of the day with Sensex closing below 12000. For long term investors, it might be a good idea to wait for some more time till the election results are out. There is an event risk to the market associated with the election and for most retail investors it makes sense to watch from the sidelines rather than jump into the whirlpool.
For traders, portfolio protection can be bought in the form of Index Put Options.

New Bull Market or Bear Market Sucker Rally?

2009-05-06T10:38:00.000+05:30

The near 50% rise from the October lows in the Indian stock market indices (from 8000 to 12000) have started the debate of whether this is the beginning of a new bull market or a bear market sucker rally. Most people have been surprised and caught unprepared for this steep bull rally. I have used this rally to prune my portfolio to a more manageable number of stocks.

To be honest, I am as confused as the next guy on whether this is the beginning of a new bull market or a bear market sucker rally. Personally, I think it is a violent bear market rally and markets will test the previous lows. Now, what will trigger the fall is anyone's guess. Maybe politics, maybe the 'swine flu' or maybe a bankruptcy declaration by a company like General Motors. But something will happen to take the markets lower.

I will take some more money off the table in the next week, before the election results are out. At worst, I will miss 5-10% of the upmove if a stable government is formed. On the other hand, if there is a hung parliament, the markets may sell off.

Let's see what happens next. As the saying goes, we live in interesting times!

Portfolio Structuring Step 4: Asset Allocation

2008-12-04T14:48:00.000+05:30

By now you have got most of the basic issues out of your way. You know how much money you have, what is your surplus for investing, taken care of your liabilities through insurance and also built up a contingency fund. The next most important step is Asset Allocation. Simply put, it means now you need to decide how much money to invest in what. There are various investment options like equities (shares), debt, bullion and physical assets (property, art etc).

One thing to understand is every investment carries some risk. The Bank FD that you think is secure carries default risk. That is the bank may become insolvent and may not be able to return your capital. Even government bonds, which are by far the safest, carry some risk of interest rate. For example, if you invest in a government bond at 8% interest for 5 years and next month the interest rate is raised to 12%, you lose out on the additional 2%. That is also a form of risk.

In terms of general risk perception, equities are the riskiest. So, you should base your asset allocation decision on careful thought. There are no "correct" asset allocations. It depends on your individual life situation.

A typical asset allocation I follow is:
Equity = 75%
Debt = 20%
Gold = 05%

I do not have any investment in physical assets like property and art, mainly because, they are capital intensive and I do not have that much of capital as of now :-)

Once an asset allocation decision is made, you need to stick to it. Look at your investments periodically(once a year is good for starters) to ensure that your asset allocation is more or less intact.

Porfolio Structuring Step 3: Build Safeguards

2008-12-03T14:13:00.000+05:30

One of the most important things you can do is to build safeguards. That includes things like building a cash nest for contingency, taking insurance cover for life and non-life risk factors. Let us take them one at a time.

1. Contingency Reserve: You need to have a amount set aside in cash to meet any emergency requirements. A good amount to keep aside is 3-6 times your monthly expenses. So, for example, for a monthly expense of 20,000, you can set aside 60,000 to 120,000 as a contingency reserve. DO NOT touch this reserve unless there is an emergency. This is not meant for your day-to-day expenses.

2. Life Insurance: Your requirement for life insurance will depend on your life stage, your current networth (calculated in step 1) and your dependents. Simple back calculation tells you that to get a earning of 100 you approximately need to invest 1200. So, multiply your annual expenses with a factor of 12 to get the amount you need to have insured. But, its always better to have some buffer in hand so for prudency jack up the multiplier to 15-20. So, for an annual expense of 240,000 (monthly 20,000), you will need the following:
@ 12 times = 28,80,000
@ 15 times = 36,00,000
@ 20 times = 48,00,000

The best thing to do is to buy pure term plans from any good, top-of-the-line insurer (e.g. LIC). Do not go for premium refund term plans as they are more expensive than the pure term plans. Use insurance purely as a risk covering tool.

Also, for prudency, break up the total insurance amount into 2-3 policies from different companies, so that you are not exposed to a particular company risk. I.e, if the insurance company goes bankrupt you still have two other companies to look forward to.

3. Medical Insurance: This is another critical factor that a lot of people miss out on while planning for their finances. Here, take the maximum possible cover that you can afford while you are young. If possible, take a family floater plan to reduce the cost. Also, pay for the medical insurance for any financial dependents you may have (parents, in-laws, siblings, children etc)

Porfolio Structuring Step 2: Understand Cash Flows

2008-12-03T14:03:00.001+05:30

The second step is to understand your cash flows. If you are a salaried employee, that is fairly easy. Just look at the monthly take home pay you get. Also, look at the expenses you incur. While looking at your expenses, add things like your insurance premiums, vacationing expenses, eating out, gifts that you need to buy etc.
Basically, add anything that you spend money on during the year. Now, make it into a monthly estimate. For example,

Monthly Take Home Salary == 30,000

Annual Expenses (all inclusive) == 240,000
then, Monthly Expenses == 20,000

Then you have a disposable income of 1,000 every month after meeting all your expenses. That is the total money you have for investment.

Porfolio Structuring (PS) Step 1: Evaluate Current Status

2008-12-03T13:39:00.000+05:30

The first step to any long term investment plan is to understand where we are at present. So, to start with you need to list down your existing networth. For example, you can have a list as follows:

Provident Fund	100,000
PPF	50,000
Bank FD	50,000
Mutual Funds-Equity	150,000
Mutual Funds-Debt	50,000
Cash In Savings Account	30,000
House	2,000,000
Housing Loan	-4,000,000
Others	0
Total	-1,570,000

A couple of things to note here.

1. I am not calculating the value of any gold/silver jewellery that you may be having. Indians, typically are not very keen on selling their family gold/silver so it really does not count as investment. You can think of it as an additional bonus if you do have gold/silver.
2. I am including the housing loan you may have as a negative here under the assumption that that is your primary home and not a second home bought for investment purpose. Also, I am taking the full value that you need to repay to the bank for the loan as your liability. This approach may not be exactly orthodox, but it gives a fairer reflection of your financial status. A more accurate reflection of the value of your house and its loan can be achieved by calculating the liquidation value of your house and prepayment value of your loan, but that might be an overkill for basic investment purposes.

With this exercise you will have a fair idea of what is it that you have been able to save till date. Many people forget to count their PF contributions while calculating their savings. But, PF is a good solid way of building up a stable long term investment corpus.

Portfolio Structuring

2008-12-03T12:36:00.000+05:30

It has been a while since I last wrote. And the market has proved everyone wrong. And, boy, how wrong were we!!! The bottoms just fell out. A lot of people are nursing their injuries of the market collapse. People have lost 70%-90% of their portfolios. My wife, who is a dedicated Bank FD investor has a know-it-all smile on her face, while I, a dedicated market buff can only put on a smile of pain.

However, being an optimist, I think that this fall has probably given us (long term investors) a great opportunity to structure our portfolios. So, weed out all the bull-market excesses and start afresh with a plan.

I will write follow-up posts on how and what to plan for to restructure your portfolio.

My takeaways from Investor Camp in Kolkata

2008-02-16T15:59:00.000+05:30

P.N.Vijay

* Look at overall economy for indication of sustainable growth
* Look at interest rates very closely as they are negatively correlated to equities. i.e, when interest rates go down, equities go up
* Fundamentals take time to develop
* Don't leverage yourself

Midcap investing has the best risk/reward in today's market

Midcaps bets can be of various types:

Plain Vanilla : Very fast paced growth in a good sector and will soon turn big enough to attract institution attention. e.g. Punj Lloyd, GMR infra, JP Associates
Mergers and Demergers: COmpanies create value by merging and demerging. e.g TV18, KEC
Overseas Acquisition: Often leads to rapid increase in size and mcap/sales
Restructuring: Improving balance sheet by restructuring debt
New Story: New sunrise industries e.g. Educomp, Praj, MIC Electronics, Everest Kanto

Opportunities in 2008: Karuturi Networks, Shriram Transport Finance, Provogue

Ashwini Gujral

* Manage your capital so that no loss is your final loss.

* Only three things are required for successful trading: Method, Capital, Discipline

* The moving average indicator is a trend following indicator.

Fundamentals are known after a lot of the upmove in the stock is over.

Moving average indicators for traders
10/13 EMA - short term traders
23/30 EMA - swing traders
50 EMA - intermediate trend trader
200 EMA - long term trader

Ashwini's picks for 2008: Auto (Tata Motors, Maruti, Ashok Leyland), Tech (Satyam, TCS, Mphasis), Sugar (Bajaj Hindustan, Balrampur Chini), PSU Banking (SBI, PNB,BOI)

His word of caution: Do not over leverage. Protect your downside in 2008. 2008 looks to be like a year of consolidation.

Rajat Bose

* Trade what you see, not what you think
* Focus on movement of prices above everything else; your trades get settled on the basis of prices and nothing else
* Everything else is secondary: news, views, indicators, volumes etc
* Trade management is more important than entry into a trade
- cut your losses; let profits run
- stop losses should be predetermined and strictly followed
- NEVER average a loser
- NEVER meet a margin call
- Increase your position in a trending market
- Reduce the position size in a volatile market and/or when you are on a losing streak

* Preserve your capital
* Aim at attaining consistent profitability
* Grab any supernormal profits you get

Rajat's picks for 2008: Balrampur Chini, Jeyashree & Sakthi tea, Upper Ganges Sugar, Selan Exploration, GMDC, Gujarat NRE Coke, Techno Electric, Universal Cables, Cent BoP, City Union Bank, Karnataka Bank, XL Telecom, RelCom, Gold ETF

Angel Broking House View

New emerging theme: Agriculture

Stock Picks: ITC, HUL, Coromandel Fertilizers, RCF, Ralis India, Autoline Ind, BASF, BOC, Clariant Chem, Gillette, GMM Pfaudler, Honda Siel, Jindal SAW, MRF, SCI, TNPL, Tata Motors, Vardhaman Textiles, Finolex Cables, Uniflex Cables, RPG Cables, Merck, Pfizer

Falling Indian Equity Markets

2008-01-25T14:28:00.000+05:30

Warren Buffet once famously said, "Only when the tide goes out do you discover who's been swimming naked". This market correction showed up a lot of people who were swimming naked. i.e, people who were long on stocks or futures with very little knowledge or conviction about the companies they are invested in. For long term investors, a large market correction provides a good time to invest into the market. The market again showed that you can get washed out if you are leveraged. A friend, who started active trading a few months back, was very happily making money before the carnage happened and was telling me about his stock market conquests. I asked him to be careful and he responded saying that he always puts stop losses in place. I still told him to be careful as stop losses does not always do what its meant for. I met him again today and he had lost ALL his capital and is in debt to his broker. So, he now needs to borrow money to pay his broker!!! I asked him what happened to his stop losses. He said they did not work because the stocks were in a downward freeze and there were no buyers. He told me that he wished he had taken my advice to be careful.

Now about the fall in the market, I think there is no reason that the market fell off in the way it did. Looking at the amount of money mutual funds have collected via their NFOs and also the insurance ULIP products that sell the highest in Feb-March period every year, I think there is going to be a significant amount of money that will get invested in the next 2 months for the market to fall off dramatically from here. In fact, without getting into conspiracy theories, the fall may have been orchestrated to enable bigger players to buy into at lower levels with the weaker retail investors panicking and selling off.

So, my suggestion is to buy into companies which you know are doing well and whose business cycle is positive and then wait for the market to move up in the near future. We may be testing new highs sooner than people are expecting.

What to do when the market corrects?

2008-01-11T11:45:00.000+05:30

Since, the markets are choppy and most of the stocks in the mid-cap universe are correcting, the question at the top of the mind is, what can be done to protect our capital? Well, there are three approaches that can work and I am listing them here.

1. Sell - This is the simplest of the propositions, but one of the toughest things to do from a behavioral perspective. If you have stocks that are fundamentally weak and you had bought them to take short terms profits in it, then it is better to sell them, even if it means that you need to take a small(or large) loss. However, if you are convinced about the business and future prospects of the company, then corrections are good opportunities to buy into the stock.

2. Short Sell - Active traders can think of this approach. Sell the stocks you have in your DP and buy it back at a lower price. That way your net position on the stock is not changed but you make some money on the way down.

3. Buy Puts - Again, this is for high risk traders. They can profit from buying puts (or selling calls) in a bearish market.

So, you don't need to lose your sleep when the market corrects. Make money even if the market goes down.

New Stock Idea - ICSA

2008-01-07T10:32:00.000+05:30

Another stock idea - ICSA.

Its present in the products and solutions of Power transmission and distribution.

ICSA's main products are Distribution Transformer Monitoring Systems, Theft Detection Devices, Intelligent Automatic Meter Reading, Remote Street Light Control Systems in the Power Transmission and Distribution space. Its Intelligent Cathodic Protection Solutions is a star in the Oil and Gas pipeline space.

ICSA’s clients in the power sector include almost all SEBs and leading private players like Reliance Energy. In the Oil and Energy space, it has huge orders from Oil India and is expected to finalize contracts with several others.

I will put the financial data in the next blog entry.

Resolutions for the New Year

2008-01-01T10:29:00.000+05:30

Since, its the New Year and it is sort of nice to have some resolutions, here are my ones.

Lose Weight - This has been at the top of my list for the last few years and as usual I have not lost a single kilo. So, this year I am renewing my resolve to lose weight. But, what I will also do is to have a plan for losing weight systematically.
Spend More Time with the family - Work has seemingly taken over my life and time spent with the family has been on the decline. Utilization at work is a highly monitored metric. Resolving to have high "utilization" at home & with family as well.
Make money - 2008 probably would be a year where it would be difficult for all market players to make money. My target is to preserve my capital and make atleast 15-20% returns by end of the year.

Kalindee Rail - Trading Call

2007-12-31T17:08:00.000+05:30

My trading call on Kalindee Rail turned out to be a stunner, even to me. It has gone up by over 50% in the last 3 trading sessions. I suggest you take some profits off the table. Also, for Orbit Corp that I had recommended earlier, please use a trailing stop to lock in your gains. I am looking at a few stocks for trading in the next few months and hopefully will be able to have an update in the New Year.

Trading Picks for 27 Dec 07

2007-12-27T09:25:00.000+05:30

My yesterday's recommendation of Kalindee Rail Nirman flared up 20% and was locked on upper circuit. I am expecting another 10-15% jump today. If it comes through, it might be prudent to take the gains off the table. If you are getting 30% returns in 2 days, you need to take some money.

Look at buying Essar Oil today. It closed at 301 yesterday. Short term target is close to 390-400. Also, with Reliance moving up yesterday, a position in Bongaigaon Refinery may not be a bad idea today.

Another stock pick

2007-12-26T14:14:00.000+05:30

I was looking for a decent mid-cap stock in an exciting market segment and stumbled across Bartronics. The company operates in the niche segment of bar codes, smart cards and RFID. With the huge growth of organised retail in India in the coming years, Bartronics with its market leader position is well placed to capture the opportunity.

The company has had very strong growth in the last few years. The company has no significant long term debt.

	Mar ‘07	Mar ‘06	Mar ‘05	Mar ‘04	Mar ‘03
Sales	63.52	29.04	18.06	12.58	8.31
Operating Profit	17.21	7.52	4.61	3.25	1.16
Net Profit	13.46	5.34	2.40	1.35	0.14
EPS	7.52	3.60	2.74	3.09	0.33
RoE	10.89%	7.81%	25.08%	17.22%	2.64%
RoCE	10.14%	6.96%	14.14%	9.72%	1.30%

Also, in the first half of 2008, the sales is 54.27 cr and net profit is 8.93 cr. The EPS is Rs. 5.01. So, financial year 2008 also looks to be very strong with respect to sales although there is a concern on the net profit front.

The margins are around 22% and the stock is available at a PE ratio of around 28.

It looks like a good fundamental buy with a 2-3 year perspective.

Some new stock ideas - Railways

2007-12-26T10:10:00.000+05:30

At the closing of 2007, let me leave you with a few stock picks for the New Year. The main theme here is the infrastructure development. However, the below mentioned three stocks are mainly in the railway infrastructure space. With the thrust on railways and the upcoming rail budget, these stocks should give decent returns.

1. Kalindee Rail Nirman
2. Texmaco
3. Kernex Microsystems

You can buy/hold these with an outlook of 3 months to a year.

Statutory Warning: Please consult your financial advisor for your personal financial advice. I may have a vested interest in all stocks I comment on.

ET CEO Cookout - Kolkata - writeup in ET

2007-12-04T18:20:00.000+05:30

Here is the link to the article that was published in ET:

http://economictimes.indiatimes.com/articleshow/2589891.cms

ET CEO Cookout - Kolkata - My experiences

2007-12-04T15:47:00.000+05:30

The ET CEO Cookout was supposed to start at 7pm and was held at ITC-The Sonar. For some unknown reason, ITC seems to have changed the name of the hotel from ITC-Sonar Bangla to the current one. Is it ITC believes that Bangla isn't Sonar (made of gold) anymore??!!

It was a unique experience for me to be amongst so many luminaries of the business world. Jairam Ramesh, YC Deveshwar and Percy Siganporia were all there. There was a lot of anticipation for the arrival of Buddhababu. He came in at around 7:45pm and that paved the way for the start of the evening's proceedings.

The ET executive director (missed his name) started off the proceedings with a short speech and introducing the guests. Buddhababu followed him with his thoughts on India's infrastructure deficit. Although, Buddhababu claimed that he had not time to prepare, it was pretty evident that he had a lot of information on it. The way he was rattling off data about infrastructure spends in India vis a vis China indicated he had spent a fair amount of time on studying the infrastructure issue. His speech mainly on China's infrastructure advances and where we are lacking behind. An unrelated observation was that he looked very serious through out the meet, probably a reflection of the recent troubles he and his state administration have been having.

Buddhababu's speech was followed up by Jairam Ramesh. Ramesh insisted that funding from Indian infrastructure development has to come from DI (Domestic Investment) and not from FDI (Foreign Direct Investment). He also wanted the government to act as venture capitalists in funding the projects and let the private sector manage the projects.

He was followed by Y.C. Deveshwar who said that providing a framework for incentives and dis-incentives was important for the private sector participation. His point was that companies like his (ITC) were not given any benefits for all the ecological good they do. Somehow, no one asked him what it would be like if his company was asked to pay back for the health damage its products inflicted on its consumers. Well, thats a separate debate altogether :-)

Deveshwar also said that conservation of the natural resources we already have are of utmost importance. That was a point that I fully agree with and also made in my solution.

Percy Siganporia came in next. Dressed in a body-hugging black suit & a black shirt with the top few buttons open and a Shah Rukh-ish pony-tail, he looked more like a film personality than a CEO of a conservatively managed company like Tata Tea. His speech sounded straight from the heart. He was the only speaker who bought in the topic of developing our soft-infrastructure like education, healthcare, social security etc. That to my mind was something that was worth taking note of and acting on.

After the speeches and some questions and general discussion where people generally discussed different perspectives on the topic, the CEOs and Jairam Ramesh proceeded to cook. The cooking bit was just a matter of symbolism. The food was all ready and the buffet table laid out.

The food was amazing. Right from the canape to the main course, all the dishes were in oriental style. I particularly liked the sushi perhaps because it reminded me of my meals in Tokyo.

I had dinner with the US Consul General and struck up a general conversation with him. He is a fairly young person and has quite a good sense of humour.

Overall it was a very good evening. Great company and some amazing food made it an evening to remember.

ET CEO Cookout - Kolkata

2007-11-29T20:40:00.000+05:30

Yesterday's post was my entry to the Economic Times' ET CEO Cookout contest and got me a place in the winner's list. So, I am getting a chance to meet have dinner with Buddhadeb Bhattacharjee (Chief Minister, West Bengal), YC Deveshwar (Chairman ITC), B Muthuraman (MD Tata Steel), Percy Siganporia (MD Tata Chemicals) and Jairam Ramesh.

I will post an update on the event after tomorrow.

Solution to India's Infrastructure Problem

2007-11-28T19:30:00.001+05:30

India's infrastructure deficit is centered around three problems:

1. Funding

2. Regulatory Framework

3. Land Acquisition

Instead of looking at the problems, let us try to look at the possible solutions.

For funding, it is obvious that the Indian government does not have the required funds to meet the infrastructure needs of the nation. One theory doing the rounds is to utilize a part of the ever-burgeoning foreign exchange reserves to fund infrastructure spends. Another way is for the government to float infrastructure bonds and provide tax breaks for people who invest in them. Also, dedicated companies can be floated (on the lines of Power Finance Corporation) that will be vehicles for long term capital for companies building/operating infrastructure projects.

Another aspect which is not focussed on much, is maintenance of infrastructure projects. Annual maintenance contracts should be awarded to companies with very strict performance criteria. The performance should be monitored by an independent nodal agency created just for this purpose and payment should be based on relative performance.

The regulatory framework also needs to be looked at. Private companies need a stable and non-interfering regulatory regime. For example, the Indian government allowed private participation in petroleum retail saying that the administered price mechanism of petrol & diesel pricing would be done away with. With a new government and rising global petroleum prices, the government buckled under popular pressure and brought back price ceiling through the back door by selling at less-than-market rates through the public sector companies. This meant the private players were left high and dry in trying to sell a commodity at a higher price than their public sector counterparts. This practically destroyed the private petroleum retail market in India and their corresponding infrastructure development efforts.

The latest problem to have hit the nation is the violent protests related to land acquisition for development projects. This is a very sensitive issue and needs a lot of care while handling. Proper rehabilitation packages, financial incentives and integrated transparent communication to enable people to understand the gains they can make by participating in the development of the nation.

If we can get some of these things in place India should be looking at great infrastructure development in the years to come.

Unbiased Financial Advice

2007-11-14T14:08:00.000+05:30

Early this week, on Monday, Josh, a dear friend called me and asked me for some investment advice. He has just become a father and wants to create a fund so that it takes care of his daughter's education. Now, this is a kind of call that I keep getting regularly. Most of my friends (and friends' friends) ask me for investment advice thinking that I am an expert in the field!! I have got numerous offers to start a private (equity) fund from a few of my friends where they will "outsource" their headache of managing their savings. What I fail to explain to them is that there are no experts in the world of investments. Everyone is as good (0r bad) as the next person.

But this call got me thinking about investment advice and advisers in general. Apparently, my friend had been approached my a few financial advisers who had advised him to buy into certain mutual funds. Typically, these advisers are associated with financial brokerages and make money from commissions when people buy into funds. So, their incentive is to make people continuously churn their portfolios (because thats the only way they make any money).

I think its important that people stop taking their financial advice from their brokers. If you are seriously ill, do you go to a chemist? No. You go to a doctor. A doctor does not have (or atleast should not have) any incentive for selling medicines. The doctor would want to see you get better so that next time you fall ill you consult him. Similarly, for financial advice you should go to an independent financial adviser who charges you money for his advice and not from commissions for selling financial products. That is the only way can hope to get an unbiased financial advice.

Managers and Attrition

2007-07-02T12:12:00.000+05:30

I was reading an article recently in BusinessWeek which quoted some senior HR leaders across industries saying that employees join companies and leave managers. I have heard that statement in all the people management workshops. But, I am not sure I completely agree with the statement. It may be true in more mature labour markets like US, UK etc, but in emerging markets like India, the scenario is not really true.

In my experience, employees decide to leave because either a "push" or a "pull" effect. Let me explain. A "push" effect is when a person is 'pushed' away because he/she does not get sufficient opportunities, salary, job role etc in his existing job. Push effect is a demonstration of employees leaving managers rather than companies. A 'pull' effect is when a person is 'pulled' away by opportunities,salary,job role etc that is available in other companies.

What I have seen is that in emerging markets like India, the 'pull' effect is much much more predominant. Good people are fewer in number as related to the growth in job opportunities. So, the demand for good people are huge. Companies are competing with one another to hire good resources and jacking up the salaries offered. This results in people switching jobs for a significant salary improvement.

There is very little that a manager can do when employees work in an environment where employee's think of working in a company as long it suits them or till they get a better offer. And, the search for a better offer does not happen due to any "push" effect of the manager but more due to the "pull" effect.